Have a heart

Not much time today, but I thought I'd point you all over to this interesting post on organ transplants over at Marginal Revolution. It's long been acknowledged in the economics field that the prohibition on paying organ donors represents a type of price ceiling which inevitably leads to a shortage of organs available for transplant. I had not, however, thought about another "bad outcome" on the part of the transplant centers. Since the folks who perform transplants are not prohibitied from profiting, this creates a perverse incentive to establish too many providers.

Transplant centers are artificially high profit centers because they capture some of the rents generated by the shortage of organs. As a result, there are too many transplant centers in the United States and each center performs too few transplants. Practice makes perfect so when a transplant center performs only a few operations a year lives are lost.

Medicare requires that transplant centers perform 12 transplants a year to be certified but many programs are in violation of that standard with little consequence. Medicare is even thinking of reducing the standard from 12 per year to 9 in 30 months. As one specialist says "I wouldn't take my car to be serviced by someone who repaired nine cars over the past three years. Would anyone do that?"

It's easy to see how payments for organ donations might lead to an outcome straight from a Philip K. Dick novel, but there are some real costs to the current "altruistic" model and I wish policy makers would think about these a bit.

That's it for today, but read the whole thing if you're interested. It's short and it's pretty good.