What the U.S. Can Learn From Iran About Markets

From "Tackling the Organ Shortage," in today's WSJ by Alex Tabarrok:

Millions of people suffer from kidney disease, but in 2007 there were just 64,606 kidney-transplant operations in the entire world. In the U.S. alone, 83,000 people wait on the official kidney-transplant list. But just 16,500 people received a kidney transplant in 2008, while almost 5,000 died waiting for one.

Only one country, Iran, has eliminated the shortage of transplant organs—and only Iran has a working and legal payment system for organ donation. In this system, organs are not bought and sold at the bazaar. Patients who cannot be assigned a kidney from a deceased donor and who cannot find a related living donor may apply to the nonprofit, volunteer-run Dialysis and Transplant Patients Association (Datpa). Datpa identifies potential donors from a pool of applicants. Those donors are medically evaluated by transplant physicians, who have no connection to Datpa, in just the same way as are uncompensated donors. The government pays donors $1,200 and provides one year of limited health-insurance coverage. In addition, working through Datpa, kidney recipients pay donors between $2,300 and $4,500. Charitable organizations provide remuneration to donors for recipients who cannot afford to pay, thus demonstrating that Iran has something to teach the world about charity as well as about markets.

The Iranian system and the black market demonstrate one important fact: The organ shortage can be solved by paying living donors. The Iranian system began in 1988 and eliminated the shortage of kidneys by 1999. Writing in the Journal of Economic Perspectives in 2007, Nobel Laureate economist Gary Becker and Julio Elias estimated that a payment of $15,000 for living donors would alleviate the shortage of kidneys in the U.S. Payment could be made by the federal government to avoid any hint of inequality in kidney allocation. Moreover, this proposal would save the government money since even with a significant payment, transplant is cheaper than the dialysis that is now paid for by Medicare's End Stage Renal Disease program.

The world-wide shortage of organs is going to get worse before it gets better, but we do have options. Presumed consent, financial compensation for living and deceased donors and point systems would all increase the supply of transplant organs. Too many people have died already but pressure is mounting for innovation that will save lives.

MP: The chart above displays data from the United Network for Organ Sharing, and shows that the number of candidates on the waiting list for a kidney keeps increasing, and went above 83,000 in 2009 for the first time, while the number of kidney transplant operations has remained flat at between 16,000 and 17,000 for the last five years. As recently as 1992, there was about a 50% chance of receiving a kidney for those on the waiting list, but those chances keep dropping every year, patients on the waiting list now have only a one-in-five chance of receiving a kidney.

Given current trends, the future looks pretty grim for those on the kidney waiting list, and the current system that makes it illegal to pay or receive compensation for a kidney is clearly not working. Just ask the estimated 5,000 American families who lost a loved one on the waiting list in 2009 due to the critical kidney shortage.