Presentation to ACERH Policy Forum February 20, 2009: Policy Options to increase organ donations

1. Presentation to ACERH Policy Forum February 20, 2009:Policy Options to increase organ donations Jon Stanford FINH Pty Ltd

2. Present position • Demand for organs for transplants met through live donors and cadaveric transplants • Shortage of organs for transplants • Long waiting lists - many patients die before receiving transplant

3. Present position - 2 • Uncertainty about property rights in posthumous transplants • Donor cannot make binding decision • Presumed consent finding opposition • from medical profession in UK • Rejected recently after official studies in UK and Queensland

4. Market for Organs • Becker et al 2007 argues for market in kidneys from live donors • General case for market: • Excess demand at current price, zero • Shown by long waiting lists

5. Case against Live Market • Sellers of body parts may not be best judges of own welfare • Myopia • Pressure to sell (can exist with live donors) • Create negative externalities • theft of organs • Exploitation of sellers

6. My proposal - Stanford, 2008 • Create an Options market for cadaveric transplants • “Donor” writes a call option for sale of body part for transplant exercisable only on death • Receives a payment (premium) on writing the option and • One when transplant occurs (striking price)

7. Variants of Option Market • Variant A: Low premium and high striking price • Variant B: High premium and low (or even zero) striking price • Under A, the “donor” wants payment made to estate • Under B, the “donor” wants to use monetary benefit while alive

8. Critical issues? • Is the option market additional to current procedure for transplants? • Who is the counter party in the options market? • How is the premium and the striking price determined? • What are relative advantages of each approach?

9. Parallel markets • Organs for transplants are purchased by an “Organ Transplant Authority”, OTA, and added to the current pool so that decisions about receipt of transplant organs made in the same way as today. • Alternatively, a private market

10. A private market • Counterparty in a private market • Individuals who want transplant • Broker who brings both sides of transplant together

11. Determination of premium • In private market would be willingness to pay • Otherwise by OTA to encourage more “donors” • High premium has moral hazard problems

12. Determination of striking price • In private market, by willingness to pay • Otherwise, OTA would determine by savings in future costs of treatment

13. A private market for transplant organs • Potential organ recipient could purchase call option • Recipient would want organ “soon” but death of “donor” is uncertain • Purchase of call option could buy higher place in the queue • Recipient would presumably indicate striking price

14. A private market - 2 • Other possibilities: • Private insurance • Suggests some broker as counterparty • Objections • To private purchases • To cost • Market would reduce genuine donors

15. Assumptions made in the proposal • That people have legally enforceable property rights in their body parts • No distinction is made between body parts - we are talking of a generic “body part” • That body parts after death are suitable for transplant and can be readily obtained and prepared for transplant

16. References • Gary Becker and Julio Jorge Elias, “Introducing Incentives in the Market for Live and Cadaveric Organ Donations”, Journal of Economic Perspectives 21, 3,3-24, Summer 2007. • Jon Stanford, A pound of flesh, Unleashed, May 8, 2008 can be found at • http://www.abc.net.au/unleashed/stories/s2238248.htm.