Draft legislation, currently before Congress, proposes to award people prepared to give up a kidney – for a stranger – a $50,000 tax credit. As one recent summary explains:
About 10,000 people die each year in the United States because they did not receive a kidney transplant in time…
The issue isn’t a shortage of kidneys—there are more than enough healthy people who could donate their spare. (Most of us have two working kidneys, but we only need one.) The crisis exists because not enough people are willing to help a stranger. Generally, that’s because we’re not well informed about the problem or the solutions.
So the question is, how do we increase the number of donors?
One potential solution is H.R. 2687, also known as the “End Kidney Deaths Act.” This proposed legislation would establish a 10-year pilot program offering nondirected donors a $10,000 refundable tax credit for five years, for a total of $50,000. If donors do not owe enough in taxes to utilize the full credit, the government will provide the remaining balance as a check, ensuring they receive the entire $10,000 benefit in each eligible year.
In theory, the legislation would help prevent thousands of avoidable deaths, financially reward donors and, overall, save billions of dollars through reducing treatment costs and boosting tax revenues.
This week, the Clark Center’s US Economic Experts offered strong backing. Asked whether “a one-time $50,000 tax credit for kidney donation to strangers (with the transplants allocated at zero cost to recipients on the basis of waiting times) would save thousands of lives and pay for itself through a reduction in the cost of providing medical care to people suffering from renal failure”, 22% of respondents – weighted by confidence – strongly agreed and 61% agreed.
It is rare indeed that a proposed new law seems capable of saving thousands of lives, boosting the income of thousands of people, and saving money overall. In the view of the panel, the numbers, though, look to stack up.
But is there a case for going further?
Rather than a scheme whereby donors give up a kidney for an unknown stranger in return for five years of pre-set tax credits, why not simply allow hospitals to directly purchase kidneys from potential donors?
The panel was also asked whether “allowing hospitals to pay people for kidney donation to strangers would be at least as effective at saving lives and more cost-effective than a tax credit”?
Here, the results were much more split. Weighted by confidence, 12% of respondents strongly agreed, 31% agreed, 37% expressed uncertainty, 18% disagreed, and 3% strongly disagreed. The panel might have tilted towards agreement, but disagreement was substantial and uncertainty high. Given that economists are, by training and experience, usually predisposed to favour market mechanisms, this was notable.
Indeed, several respondents to the question on the draft legislation had noted that it was unclear if $50,000 was the right ‘price’ for a kidney donation. One advantage of a market would be that it would quickly become apparent what sort of financial compensation was required to increase the supply of donated kidneys to a level necessary to meet demand.
It was striking how many respondents noted the ethical issues around markets in organ ‘donations’. As Maurice Obstfeld of the Peterson Institute put it, even while agreeing with the question, “as a purely economic question, yes, this is more efficient. There are issues around governance, ethics, and the ultimate source of funding that the question does not specify”.
For the Clark Center’s own Anil Kashyap, those ethical quandaries – and the potential for scandals – were enough to tip him towards uncertainty, “the ethics here are tricky and if there are some scandals over the allocations things could backfire. I can imagine a better system that works like this, but I am not sure that is what would emerge”.
For others, ethical and moral objections lead to actual disagreement. Christopher Udry of Northwestern argued that the question was tricky before concluding that, “despite the obvious efficiency losses this is a line that should not be crossed”. While Jonathan Levin of Stanford, who was uncertain, noted that “likely effective at generating transplants but raises similar and perhaps more acute repugnance objections as prior proposal”.
The economist Alvin Roth – who has done a great deal of work over the years on kidney donations – recently suggested on a FT podcast that a direct financial market for kidney – and other – donations would improve outcomes.
Demand outstrips supply, so Roth suggests incentivising demand by paying donors. He suggests a “very generous” theoretical price tag of $80,000-100,000: In the United States, a transplant cost is around the same, roughly, as a year of dialysis. But after a year of dialysis, you need another year of dialysis. So Medicare spends fifty-five billion dollars a year on kidney failure. Almost all of that is on dialysis . . . So you could really cut the bill to the American taxpayer and still pay eighty thousand or a hundred thousand dollars for a kidney, which I bet is above the clearing price.
Although, as the FT notes, “payment for kidneys is controversial, with only one country, Iran, allowing it”.
Roth’s case makes logical sense, but clearly, for many people and policymakers, there is a moral limit to where markets are applicable. It seems that if not even an expert panel of economists can be convinced of the case for allowing hospitals to directly purchase kidneys, then the general public would be an even harder sell.
