I've held off writing anything about the whole contraceptives/Sandra Fluke/Rush Limbaugh mess because it's a classic example of an important political debate turning trivial, stupid, and misogynistic. At the top level, we have the ongoing debate about how to reform the healthcare industry in this country. The current big and controversial plan is the Affordable Care Act, which is either going to save or destroy our medical industry, depending on what you believe.

The first step down toward stupidity is that under the Affordable Care Act every health insurance plan is supposed to include a lot of things that don't belong under an insurance plan. As a general rule, it's a bad idea to buy insurance that pays for things you can afford to pay for directly. Insurance is supposed to be a mechanism that protects you against disasters. This is why your car insurance protects you against the risk of major car repairs due to a crash, but not the risk of replacing worn-out tires or changing dirty oil. It's also why it's foolish to want health insurance to cover routine office visits and inexpensive medications. It's cheaper to pay directly.

So why do health insurance plans cover these things? Two reasons, one good, the other bad. The good reason is that some of these things actually reduce your overall healthcare costs, so it's to your insurance company's advantage to cover you completely. This is efficient and good for everybody. The bad reason is that your medical expenses are not deductible from your taxes (unless they're huge) but your employers are allowed to deduct the cost of buying you medical insurance from their taxes. Essentially, you are funnelling payments for your routine medical care through your employer to avoid paying income tax. It's a complicated and wasteful response to tax policy.

The first step down toward trivia is the discussion over the requirement that all health insurance plans should provide contraceptive pills for women. If this was any other medication, it would hardly be worth discussing. In any serious attempt to reform healthcare, the criteria by which drugs are included in the formulary requirements for the standard insurance plans should be spelled out and applied to all medications. There shouldn't be any need for Congress to decide these things on a pill-by-pill basis.

That's where the Catholic Church enters the fray with their insistence that contraception is immoral, and that they shouldn't have to pay for something they consider immoral. I don't understand the Chuch's position on contraception. I've heard explanations, but they always make it sound like the Catholic Church thinks that (1) people shouldn't have sex for any reason other than to have a child, and (2) the way to stop them from doing that is to force them to have unwanted children if they do. Both of those points sound stupid to me, but I was raised as a Protestant, so I might be biased.

This all leads to a confrontation over whether or not religious freedom means the Church should receive special accomodations as a religious institution so that it can sidestep the requirement to fund contraception. Given that I've heard that contraception is one of those things which insurance companies like to include for free because it reduces their long-term costs, the Church may actually be paying more for the privilege of refusing to provided birth control to women, which seems stupid and more than a little misogynistic.

Then we get Sandra Fluke's testimony before congress. It was largely a typical and unremarkable litany of the the difficulties women face from having to pay for birth control. I don't think there's any doubt that women's lives would be better if they received free birth control, just as their lives would also be better if they received free iPads. But the money for either of those things has to come from someone, and I'm sure those other people's lives would be better if they were allowed to keep the money. There's an argument to be made here, but Fluke's testimony was little more than a plea to be given someone else's money. There was nothing unusual about this, as asking to be given someone else's money accounts for a large fraction of the reasons people talk to members of Congress.

Then, for some reason. Rush Limbaugh got involved, which did nothing to reduce the stupidity of the discussion and really cranked up the meanness. He did some radio bits where he tried to portray Sandra Fluke as a "slut" and a "prostitute" who wanted to be "paid to have sex."

For some reason I don't quite understand, out of all the outrageous things that Limbaugh says, this one really upset people, to the point that they are organizing boycotts against his sponsors. My co-blogger Ken tells me it's because Limbaugh didn't just call her names, he really laid into her during a lengthy series of degrading tirades.

Maybe. I haven't heard Rush Limbaugh's show for any length of time since 1994, but I distinctly remember he used to go into a lengthy series of tirades about everything -- although mostly, it seemed, about what other people were saying about him -- and I somehow doubt this was any different. Just bad luck on Rush's part, I guess.

Some of Rush's defenders responded by reminding everyone the Bill Maher called Sarah Palin some bad words. And thus the debate on national healthcare has degenerated into an argument over which side has meaner talk show personalities.

And then, as I was writing this, I found out that Gloria Allred is trying to encourage a Florida State Attorney to press criminal defamation charges against Rush Limbaugh for "falsely and maliciously imputing to her a want of chastity" because "his reference to Ms. Fluke as a 'slut' and 'prostitute' were baseless and false." I think somebody needs to explain to Ms. Allred that there is a hell of a lot of territory between "slut" and "chaste."

Everybody knows at least one line from Shakespeare's Henry VI: "The first thing we do, let's kill all the lawyers."

But really, that line is hundreds of years old. Anybody writing today wouldn't put lawyers first on the list. Not while there are still people alive in medical billing departments.

My God, this is a stupid business.

My wife had surgery a few months ago, and I'm in the process of cleaning up the last of the bills. As near as I can tell, there are seven different entities sending us bills:

• My wife's regular doctor who took the initial complaint and helped us decide what to do about it.
• The surgeon who went in and fixed the problem.
• The anesthesiologist who knocked my wife out and brought her back.
• The hospital where the procedure was performed.
• The completely different hospital that did the lab tests.
• The radiologists who analyzed images of the problem.
• The pathologist who evaluated tissues that had been removed.

We got some of these bills relatively quickly, but others took weeks to get here, and I have no way of knowing if there are any more bills still to come. (When I had very minor surgery last summer, the surgeon's bill took months to arrive, and it arrived in the form of a collection notice for non-payment.)

By comparison, around the same time, my car had an unfortunate encounter with some suicidal geese. It took about four days to repair the car, but unlike with my wife's surgery, the entire bill was available immediately, and more importantly, the entire bill was payable to the bodyshop. I didn't have to pay the paint supplier or the Toyota parts supplier or the specialty shop that reclaimed the coolant from the air conditioner and refilled it. Even the insurance company had already promised to pay their share. It was a single, consolidated bill.

That's pretty much how everybody else handles billing. If you hire a photographer for your wedding, you don't have to pay his assistant or the lab that makes the prints. If you add a room to your house, you pay the general contractor, and he pays all his suppliers and subcontractors. Consolidating the bill is a very common service.

So, the first question is: Why can't medical billing be this simple? Why couldn't I pay for my wife's surgery with a single payment? It wouldn't necessarily have to be a single payment to the surgeon or the general practitioner. In fact, given the unpredictability of medical costs, it would probably have to be an intermediary with reasonably deep pockets. The hospital or the insurance company are both obvious candidates.

Or, given that there's money involved, perhaps it should be a new niche for the banks. It all went on my American Express card, so maybe they'd like more of the action. After all, if they can offer Travel Services, why not a new Medical Services division?

It seems like everybody from the doctors to the hospitals to the patients -- heck, maybe even the insurance companies -- would benefit from making this process more efficient. And they ought to be willing to pay someone to do it. So why isn't it happening?

I don't know. If I had to guess, I'd say that this is the sort of customer-be-damned inefficency that is at the heart of any monopoly. Since there's no obvious monopoly player, I'm guessing that it's actually a cartel of medical service providers, probably enforced by the government. This is not entirely just libertarian suspicion of government: The hospital cartel is right out in the open in many states, enforced by Certificate Of Need requirements before any hospital can open or expand. The ban on interstate sale of health insurance also serves to cartelize the insurance companies of each state, protecting them against competition in a national market.

Now we come to the second and more important question: What else in healthcare is this inefficient? I can recognize the inefficiency of the billing process because it is a relatively simple non-medical matter. I don't have to know a lot about medicine or hospital management or actuarial science to see the problem.

So if the small part I can see and understand is so absurdly inefficient, what else is screwed up just as badly, except that I don't know enough to spot it? Operating room scheduling? Radiology equipment maintenance? Laboratory workflow? Ten other things that I don't even know exist? If the problem with billing is systemic (as I suspect) there's nothing to stop it from affecting every part of healthcare.

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

-- F.A. Hayek, The Fatal Conceit

An AP story by Ricardo Alonso-Zaldivar explains a glitch in the Patient Protection and Affordable Care Act (PPACA):

WASHINGTON - President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

This is the sort of thing that happens when you try to restructure a huge chunk of the American economy by quickly passing a giant bill that nobody understands.

And this sort of thing isn't really what Hayek was talking about. This is a problem with the way various provisions of the bill interact with themselves and other law. Hayek was talking about the kinds of problems that will arise when this complex piece of legislation collides with the thousands of companies and millions of American's it's going to affect. People will respond in ways that are hard to predict. There will be unintended consequences.

Of course, some problems have already popped up that seem likely to cause a lot of trouble in the future. The worst thing I've heard of so far is the PPACA's attempt to regulate medical loss ratios, which has a pretty good chance of making a lot of health insurance companies -- especially the smaller ones, which would have to manage more volatility in their MLRs -- decide to go into some other business. On the other hand, having insurance companies stop insuring children because of onerous regulations is also pretty bad.

I guess it's change of a sort.

Obama's healtcare reform started as a beautiful vision of low-cost healthcare for everyone. I thought that was highly unrealistic, but at least it was clear and straightforward.

I guess the Democrats thought it was unrealistic too, because the Democrats soon made a series of compromises and turned it into a plan that purporte to give us all healthcare through the dubious method of requiring all of us to buy health insurance. Worse, it required us all to buy the same kind of health insurance. Those who preferred high-deductible health insurance were out of luck.

Of course, since it makes little sense to require poor people to buy health insurance they can't afford, they were to be provided with subsidies. Given the other elements of the healthcare reform bill, this was a fairly sensible thing to do. Then, for some reason---I can only guess class hatred---it was decided that people who already had very good health insurance plans were going to be taxed extra. But, in a craven political move to buy support from unions, their members were given a break on the tax for their healthcare plans.

That's about as far as it got by the end of last year, when the healthcare reform mess seemed to fall through...until now. This time, Obama's putting forward the worst idea yet: Price fixing.

Making a last-ditch effort to save his health care overhaul, President Barack Obama on Monday put forward a nearly $1 trillion, 10-year compromise that would allow the government to deny or roll back egregious insurance premium increases that infuriate consumers.

The Whitehouse website has more information at Policies to Improve Affordability and Accountability:

Both the House and Senate bills include significant reforms to make insurance fair, accessible, and affordable to all people, regardless of pre-existing conditions.  One essential policy is "rate review" meaning that health insurers must submit their proposed premium increases to the State authority or Secretary for review.  The President's Proposal strengthens this policy by ensuring that, if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.  A new Health Insurance Rate Authority will be created to provide needed oversight at the Federal level and help States determine how rate review will be enforced and monitor insurance market behavior.

Having to submit a pricing scheme to a government-run rate review board is an old idea that has been discredited over and over. It's pretty much the same sort of price control regime that held back the airline, trucking, and rail freight industries for decades until the deregulation of the Carter-Reagan era. I'm sure it will hold back healthcare.

Putting a public option in the comprehensive healthcare reform bill is a stupid idea.

Note that I'm not saying that the public option is a stupid idea, nor am I saying that comprehensive reform is a stupid idea. Either or both of those things could be stupid, but that's not what I'm talking about. I'm saying it's stupid to have a comprehensive reform bill and a public option.

Here's why: The stated purpose of the public option is to ensure that insurance companies offer quality healthcare by providing a competing option. If employees don't like any of their private choices, they can take the public option. Because of this, a public option is a complete solution to the healthcare insurance problem. No other significant tinkering is needed.

A healthcare reform bill with a public option needs only to spell out the terms of the public option to guarantee that every American can receive that level of healthcare. It doesn't matter what other healthcare plans are offered by employers, because if they are inadequate, the employee can always avoid them and choose the public option. And if the private plan is better than the public option, then the employee is better off by choosing it. Thus, no private plan can make an employee worse off, so there's no need for additional regulation.

Regulation of the healthcare insurance business and a public option for healthcare insurance are two solutions to the same problem. One of them is unnecessary.

I really don't understand healthcare reform.

People keep saying that one of the biggest problems with our current system is that about 45 million people don't have health insurance. There are reasons why that number doesn't tell the whole story, but I can understand why people are concerned. What I don't understand is how any of the reform plans would fix the problem.

I've been meaning to blog about it, but I wasn't sure where to start. Thankfully, Jennifer Abel has come to my rescue with her op-ed in the Guardian:

Before I say anything about America's healthcare reform boondoggle, I'd like you to behold my brilliant plan to end hunger once and for all (and then, after you behold it, go and kick yourself for not thinking of it first).

Providing food to those without is simple, really: we'll just pass a strict law requiring all hungry people to buy some, and if they don't, fine them harshly enough to persuade even the most recalcitrant ones it's in their best interest to eat something once in a while.

Now change "food" to "health insurance," and behold: you have what Congress and President Obama want to inflict upon hapless constituents like me.

Yes, the healthcare plan includes mandatory health insurance for everyone. So the plan for making sure everyone is insured is...to require everyone to buy insurance.

Understand that this isn't going to make much difference to the 85% of us that have health insurance already. We won't have to pay a dime under this new plan. The only people who will have to come up with money are the people who are uninsured now. I have trouble seeing how this will help them.

In fact, if we remember Watergate and "follow the money," the most obvious beneficiary is the insurance industry. How great would it be to work in a business where people are forced to buy your product?

I've been skeptical of healthcare reform from the start, but for those of you in favor of it, is enriching the insurance industry what you had in mind?

In response to my earlier post of a couple of thoughts on healthcare, a reader called "bunkerbuster" throws a few interesting questions my way:

What's your view on demand for health care?

The market model would have it increase to infinity if it becomes zero cost to the consumer.

Generally, that is the rule, but I think "bunkerbuster" is right to be skeptical for three reasons. First of all, the market model is a model, and nobody seriously expects models to work at the extremes. Having an infinity turn up in the middle of your model is usually a sign that you've gone too far.

Second, healthcare has non-financial costs---such as the time it takes from a busy day and the fact that it's often very uncomfortable---that prevent the true cost to the consumer from ever dropping away to zero.

Third, like everything else, healthcare has diminishing returns. The most important bits of medical care are extremely important to your health, but additional care is less and less valuable. These returns likely diminish all the way to zero---or at least below the costs mentioned in the previous item. Once you've fixed everything that's wrong with you, why would you buy more healthcare, even if it's free?

(Of course, health problems can be defined down. Back when most children never made it to adulthood, nobody worried about allergies. Nowadays, people take pills to get rid of toenail fungus, and some plastic surgeons have lobbied to have small breasts classified as a disorder.)

But in reality, the non-union pipefitter who can now afford to have regular check ups may well have significantly lower long-term demand for medical services.

So here's a point to ponder: If preventive care reduces long-term costs, shouldn't we expect uninsured people to consume a lot of preventive care, since they are more directly exposed to the costs? That's apparently not what happens, however, because our healthcare system already includes a distortion in healthcare pricing, as illustrated by the last part of the comment:

And there's always the classic emergency room scenario in which demand for those ER resources balloons because the poor have nowhere else to go and because minor problems go untreated until they are emergencies...

This happens because hospital emergency rooms aren't allowed to turn people away, even if they can't pay. For poor people, this artificially lowers the price of emergency care with respect to non-emergency care, which distorts the healthcare decision-making process. From the indigent patient's point of view, emergency care is cheaper than non-emergency care. And when something has a low price, people buy more of it.

Since non-emergency situations can progress into emergencies if untreated, this creates some perverse financial incentives for poor people to avoid preventive medical care. But what are the alternatives? Refusing emergency care to people who can't pay? Paying for every doctor's visit, no matter how unnecessary? There are no easy answers.

(And, just to mix things up a bit, some statistical evidence suggests that the benefits of preventive care aren't as clear-cut as we might suppose.)

Back on my latest I'm-going-to-be-blogging-about-healthcare post, reader Seth makes a few points in the comments. Here's the first one:

Last August, I boldly announced that I would begin blogging more about healthcare.  Like most such announcements here, it didn't work out. I had figured the big story for the next administration would be healthcare, but just days later the economy blew up.

The story of the Obama administration is turning back toward healthcare now, and I'd still like to learn about healthcare issues, so I'm finally getting around to starting some research.  (My recent experiences with the healthcare system probably have something to do with it.)

Before I actually learn anything, I thought I'd document some of my thoughts and intuitions about healthcare and ideas for reform, so that I can compare my current biases with my more informed opinions in the future.

So, in no particular order, here's what I believe or suspect right now:

• I'm not entirely convinced we have skyrocketing out-of-control healthcare costs.  Our total healthcare expenditures are rising, but that's because (1) our population is getting older on average so we need more healthcare, and (2) healthcare technology is getting better, so there's greater value in buying it (kind of like the reason most households have higher computer expenses today than they did 25 years ago). This is normal.
• The only healthcare externalities are infectious diseases.
• The reason some people can't get healthcare is because it's a scarce commodity: There aren't enough doctors, hospitals, nurses, drugs, and medical equipment to give everyone the care they want.  That some people can't afford healthcare is merely a symptom of its scarcity.
• Any healthcare reform plan that does not increase the supply of healthcare---more doctors, hospitals, nurses, drugs, and medical equipment---cannot possibly provide more care.  It can only change who gets the care.
• Lots of people say you can make healthcare cheaper with more efficient handling of medical and billing data.  I believe this is true, but that the overall saving will be small compared to the total for healthcare.
• Some of the cost is due to protective barriers to entry in the medical profession.  Many routine tasks performed by doctors could be performed by less skilled people.  The emergence of low-cost clinics staffed by nurse practitioners is a step in the right direction.  If more efficient data processing is going to have a serious effect on medical costs, it will be by enabling more care to be provided by less-expensive labor.
• As long as healthcare remains scarce, we will have to ration it somehow, either by price or by insurance claims processing or by government rules.  There will always be people who can't get what they want.
• The diseases you get are somewhat random, the accuracy with which you're diagnosed is somewhat random, and the outcome of your treatment is somewhat random.
• All that randomness amounts to risk, and the presence of risk means that insurance---private or public---will be an unavoidable part of healthcare for the foreseeable future.
• The health insurance market is perverse in that the assymetry of knowledge runs opposite to the usual direction of most markets:  The person buying health insurance almost always knows more about their health than the seller of insurance.
• Under the wrong conditions, that can cause massive adverse selection---where only those most at risk bother to buy insurance.
• Medical care is very complicated, so healthcare buyers---patients---don't usually know much about what they're buying.
• Much of what we call health insurance---especially coverage for routine medical procedures that people can pay for themselves---is really a legal way to dodge taxes:  Our employers pay for medical insurance with pre-tax dollars, but if we had to pay those fees ourselves, we'd pay with post-tax dollars.  This distorts and obscures the insurance market.
• If not for the tax advantages, most people wouldn't buy non-catastrophic health insurance.
• The problem of pre-existing conditions is a particularly ugly feature.  If you have a chronic $25,000/year disease, nobody will want to insure you for less than $25,000/year.
• One solution to the problem of pre-existing conditions is to make health insurance companies responsible for the lifetime costs of any condition discovered during the period of coverage.  This is like medical malpractice insurance, where a lawsuit many years later will still be covered by the company that held the policy at the time of the doctor's mistake.
• A robust system of post-discovery specialized re-insurance may make the process more efficient.  For example, if a covered person is diagnosed with lung cancer, their insurance company could pay a lump-sum premium to a company that specializes in lung cancer to cover all future treatment.  These companies would have strong incentives to improve patient care in order to cut costs.
• Private insurance should probably be backed up by the government so that failed insurance companies do not leave people uncovered---perhaps policy blocks could be bid out to other companies.
• Any government insurance should be at least partially re-insured on the private market to establish realistic pricing.

Some of this must be wrong, much of it could be wrong, but I doubt it's all wrong. We'll see.

Hey everybody! I've got a plan that will provide high-speed broadband service to every American! Wanna hear it? It's simple: Just have Congress pass a law forcing every American to buy high-speed broadband service!

I'm kidding, but these people aren't:

WASHINGTON - The health insurance industry says it will support a national health care overhaul that requires them to accept all customers regardless of pre-existing medical conditions.

In return, the industry said Wednesday, it wants Congress to require that everyone buy coverage.

I guess that's one way to avoid adverse selection. This is the classic request of any regulated industry: Regulate us more so we don't have to do the hard work of competing. Just watch, dividing up the market is next.

I'm not really going to send this, but...

NAME OF HOSPITAL REDACTED
Attn: Billing Department

Dear Sir or Madam,

Earlier this year, a family member made several visits to your fine hospital. The treatment was excellant, and we are glad to have such a fine medical resource located so conveniently.

Shortly thereafter, however, we started receiving bills for those visits. Then we received more bills for different amounts, some higher, some lower. Some of them appeared to be duplicate bills. Others were a complete mystery.

As is my way with morons who ask me for money, I've been ignoring you. A few months ago, you threatened to turn my account over to a collection agency. I ignored that too, as I have no fear that you will ever get your act together to come after me, because, as I implied in the first sentence of this paragraph, you are morons.

It's not that I haven't been making payments. My payment strategy has been a little like adjusting a patient's medication dosage through titration: I send you some money and see how many bills I get next month.

Through this method, I eventually figured out a few of your moronic accounting practices. For example, my family member was prescribed a dose of medication to be infused over a period of three days, and you appeared to have sent us three separate identical bills, one for each day, with each day's infusion being billed to a separate account number.

To be clear, I doubt that you, dear letter reader, are a moron. Nor is your boss, the person handling my account, or any single employee of your fine institution. But somehow, in a way almost unique to hospitals, you exhibit the collective intelligence of a sponge. Dont feel bad; It's probably not your fault.

I've just sent out checks for the final amount I think I owe you. We'll see if I'm right.

Looking forward, I suggest you try a new technology that all the cool companies are using called a statement of account. I know this seems like a radical approach, but I think you will find people are more likely to pay you when you tell them how much they owe you, and why.

Sincerely,

Mark Draughn

Given all that they ask of other people, the venality of the organ transplant business amazes me. I've already complained about their willingness to pay everyone involved in a transplant operation except the person who actually has the organ to be transplanted. To the surprise of nobody who understands economics, there's an organ shortage.

Here in Illinois they've decided to increase the organ supply a little by bending the truth. Tom Simon posts part of a message from Scott Meis of Donate Life Illinois which includes the following:

So few Illinois residents are []aware of the fact that signing the back of your driver’s license is actually NO LONGER adequate for making you an organ donor.

The Donate Life Illinois registration page contains a similar statement:

If you live in Illinois and signed up to be an organ & tissue donor before January 1, 2006, you need to RE-REGISTER in order to make sure your wishes are carried out. Signing the back of your driver’s license is no longer adequate in Illinois!

Both of these statements are disingenuous. If you signed your license, your consent to donate is as good as it ever was.

What changed in Illinois is that your consent to donate your organs on death no longer requires the permission of your next of kin. The procurement team can simply look you up in the registry and take your organs without needing to get explicit permission from your family. They expect to get more organs this way because they can't be stopped by family members who are too distraught to make a decision. (I imagine they can even take the organs over your family's vigorous objections, but my guess is they'll be reluctant to do that.)

Both Meis's message and the Donate Life Illinois website explain all this. However, their explanations imply that your consent to donate is invalid until you register, and that's not true.

If you're like me and you signed up as a donor before 2006 then you didn't agree to this new way of doing things. You agreed to donate your organs only with the consent of your next of kin. That has not changed in any way. If you die without re-registering, that will still happen. The procurement team will simply approach your next of kin for permission.

If you read both the quoted statements carefully, they are technically correct in stating that signing your driver's license is inadequate to make you a donor. It always has been, because they needed your family's permission to take your organs. But I'll bet that's not what you thought those messages meant.

Update: Now that Virginia Postrel has linked to me, I should add that Scott Meis emailed me about this post. Although he objected to my characterization of this as "fibbing," he did say he'd clarify the wording on the Donate Life Illinois registration page. Check it and see.

I should add that there's nothing wrong with joining a registry that allows the organ procurement team to ignore your family's wishes, if that's what you want them to do. Maybe your family doesn't agree with your decision to donate organs, or maybe you know they have trouble handling things like this. On the other hand, maybe you want to leave these matters in their hands because you trust them to do what's right. After all, they know you best.

Michael J. Fox on stem cell research

[This is a followup to Part 1, and Part 2.]

Charles B. Fruit, the Chairman of the National Kidney Foundation recently got a couple of letters published declaring his opposition to paying for kidneys. Both of them are worth reading, if only to see how pathetic the arguments are.

The first note was printed in the Wall Street Journal:

Rather than retreating from Mr. Epstein's dismissal, the National Kidney Foundation and I stand proudly, not only to endorse last month's Institute of Medicine report on organ donation, but to count ourselves among the millions of other "high-minded moralists" who oppose treating life-saving organs as commodities. There is a reason why Congress, through the National Organ Transplant Act of 1984, wisely prohibited any "valuable consideration" -- including financial transaction -- to acquire, receive or transfer organs. Families decide to donate the organs of a loved one for altruistic reasons. Payment is an affront to those who have already donated,

Stop right there! This is probably the stupidest argument against organ markets ever.

First of all, a usage note: An affront is a deliberate offense. Clearly, nobody is trying to intentionally offend organ donors.

Second, this "affront" sounds an awful lot like envy. If hospitals started paying for organs, I can see where people who had recently given them away for free would be angry. But if it were me, I wouldn't be angry that people were being paid, I'd be angry that I'd been ripped off!

The best reason for allowing payments for organs is to increase the number of donated organs, therefore saving lives. There may be good and moral reasons why that is not a trade-off we should make, but keeping people from being offended isn't one of them.

Besides, why should we care if those who have already donated are offended? It's not like they can take the organs back.

and evidence from a national poll indicates it may prove similarly offensive to future donors as well. The National Survey of Organ Donation (Wells, 2005) found that 10.8% of those polled would be less likely to grant consent for the organs of a deceased family member to be used for transplant if they were offered payment. And 68.2% said they would be neither more nor less likely to grant consent.

Those numbers add up to 79%. What about the other 21%? What did they have to say? The only remaining option seems to be "more likely." I can't find the National Survey of Organ Donation online, so I can't check.

If we give Fruit the benefit of the doubt and assume the omitted numbers don't invalidate his evidence, then this is a much better argument than the first one. If paying people would actually reduce the organ supply, then of course we shouldn't pay people.

But I don't believe it for a moment.

If paying people to donate organs makes them less likely to donate organs, it would be a shocking exception to the usual economic rules. In every other human activity, paying people makes them more likely to do what you're paying them to do.

Just because something is altruistic doesn't mean you can count on people doing it for free. We pay firefighters, don't we? Sure, there are also volunteer firefighters, but most of those are in small towns. That's the equivalent of kidney donors who give to their sick friends. In a large city, you have to pay people if you want them to bear that amount of hardship for strangers.

What about all those people who answered the poll and said payment would make no difference? They're lying. Nobody wants to admit they'd sell their family members' organs. It does sound unseemly, after all, especially with people like Charles Fruit going around badmouthing the idea. Of course they didn't want to admit it. After all, this was just a poll. If you want to find out what people will really do, you have to put some money on the table.

Few people take on difficult tasks solely for the internal feel-good reward. Priests are following a religious calling, yet the churches have to pay. Soldiers are patriots defending their country, yet the country has to pay. Doctors are paid to heal the sick, yet the sick have to pay. Organ donors heal the sick too, so why shouldn't they get paid?

Overall, Mr. Epstein calls for "a sensible, above-board, functional organ market" where "price should be determined by supply and demand." We moralists can only pray that his proposed market mechanism for the transaction of hearts, lungs, kidneys and other life-saving human organs would work a little better than it does for the nation's consumers of gasoline.

More stupidity. The national gasoline markets work very well, especially when idiot politicians leave them alone. Sure, people are complaining about the price of gasoline, but what they're not complaining about is a shortage of gasoline. The gas may cost more, but there's still plenty of it.

Here's a thought experiment for you: Go fill your car with gas right now. Even if you are reading this in the middle of the night, you could probably have your tank full within half an hour. For some people, it might be twice as long; for me, it's ten minutes.

The median wait for a kidney is three years. That's long enough to build an entire gas station. I think this is a clear win for market efficiency.

The second letter, published in the New York Times, repeats the polling data from the first one, and then goes on to conclude:

A wholesale sellout to the law of supply and demand is not the answer.

The "law of supply and demand" is a scientific law, like the "law of gravity." Unlike manmade laws, which are prescriptions for desired behavior, scientific laws are descriptions of observed behavior. The law of supply and demand is a description of what happens, not of what we'd like to happen.

The science of economics is softer than the science of physics, but not so soft that we can ignore its laws just because we want to. The supply of transplantable kidneys is subject to economic laws whether we want them to be or not, and right now the law of supply and demand is killing people who need kidneys.

In the United States, about 20,000 people need a kidney transplant every year. About 7,000 kidneys can be taken from people who donate their organs when they die, so only 13,000 kidneys have to come from living donors. In other words, the demand for kidneys is 13,000 per year.

Every year in this country, four million people turn 18. Nearly all of those people have two kidneys but really need only one to survive and live a normal life. That means we have a potential supply of four million spare kidneys every year. To meet the demand for 13,000 kidneys, we only need a little more than 3 in every thousand people to donate a kidney.

However, because organs cannot be sold, the price of a kidney is effectively set at zero dollars. At that price, only slightly more than 2 people per thousand decide to donate kidneys. That means the supply is only about 9,000 kidneys per year. The other four thousand people who need kidneys can't get them. So they die.

Maybe we should sell out to the law of supply and demand just a little, because right now it's kicking our ass.

[This is a followup to Cash For Kidneys, Part 1.]

One of the things that would bother me about donating a kidney is that I'm using it. Granted, living with one kidney isn't much of a hazard. You really only need one to do the job, and having a spare isn't all that useful since kidney diseases usually attack both of them at once. Still, I'd be more willing to donate a kidney if I was more likely to get a spare if my lone kidney started to have problems.

If other people feel that way, then there's positive feedback in the system: The easier it is to get replacements, the more people will be willing to donate their own, which will make it even easier to get replacements, which will make people even more willing to donate. People would be giving and getting kidneys all the time.

For that to work, we'd have to have an efficient system of distributing transplant organs. You'd think we already have one, but I'm not so sure. What we have right now is UNOS, the United Network for Organ Sharing, a non-profit organization which has a federal contract to coordinate organ transplants.

An article in the Kansas City Star describes how the U.S. is divided into 11 transplant regions, and most people needing organs are listed with their regional center. Apparently, however, some people travel to other centers and get themselves listed there as well.

But the practice is expensive, requiring duplicative comprehensive medical examinations and frequent blood tests—for which Medicare pays most of the costs.

It also requires travel that not everyone can afford and the sophistication to navigate a particularly complex part of the American health-care system.

[...]

A medical evaluation—which must be done anew with each listing—costs an average of $12,300, according to a report by Milliman USA, a health-care actuarial firm. Monthly blood screenings for each listing are $250 each, according to UNOS. Medicare picks up much of those costs when private insurance does not.

From reading that, it seems that the obvious thing to do is to improve sharing of patient data between transplant centers so they don't have to duplicate the medical evaluation and testing costs for each center. That shouldn't be hard in the age of the internet.

A more long-term solution might be to eliminate the artificial barriers between transplant regions so that the organ network is truly a national resource. We're a wealthy nation. We can afford stuff like this.

But that's not how the people in the transplant business see it:

John Sadler, founder of the Independent Dialysis Foundation in Baltimore, called it "basically unfair to someone who isn't capable of going to several different places." It also leaves a bad impression, said Arthur Caplan, chairman of the University of Pennsylvania's department of medical ethics.

"Clearly, those who have more resources are going to have greater access to more than one center. ... People wouldn't do it unless it increases their chances of getting an organ that would go to somebody else," said Tarris Rosell, a bioethicist at the Center for Practical Bioethics in Kansas City.

[...]

UNOS concedes that multiple listing is unfair. In 1988 the UNOS board of directors recognized that the practice favored "the wealthy patient over a less well-to-do patient." In 2003 it said multiple listing continued to cause inequities.

[...]

UNOS several times has considered banning or limiting multiple listing. But each effort was quashed by a coalition of patient advocacy groups and large transplant centers, observers say. Since 2003, UNOS has required that all transplant patients be told of the possibility of multiple listing.

In other words, transplant patients are trying to work around the inefficiencies of the system, and the people running the system are trying to stop them.

The people opposing multiple listing aren't real clear about why they think it's unfair to poor people. I'm guessing the reason is that poor people on the waiting list in one region can find wealthy people from other regions getting in line ahead of them.

That does sound unfair at first, but I'm not convinced. Organ transplant priorities are based on medical urgency and the quality of the match between donor and recipient. An organ recipient coming in from other regions can only get ahead on the list if their need is greater or their chance of success is better. Isn't that how it should be?

In fact, isn't that how it should be for everyone? As far as I can tell, the most unfair thing about multiple listing is that they don't do it for everyone automatically.

Update: Part 3 is up.

Virginia Postrel, who recently donated a kidney to a friend, has an op-ed in the Los Angeles Times about the disincentives of becoming a donor:

My parents were appalled. My doctor told me, "You know you can change your mind." Many people couldn't understand why I didn't at least wait until my friend had been on dialysis for a while.

This pervasive attitude not only pressures donors to back out, it shapes policies that deter them. Some transplant centers require intrusive, demeaning psychological probes that scare people off. Some bioethicists suspect that donors suffer from a mental disorder, as opposed to being motivated by benevolence or religious conviction.

[...]

The most obvious way to increase the supply of any scarce commodity—paying more for it—is illegal. Federal law blocks transplant centers, patients and insurers from compensating donors in an above-board process, with full legal and medical protections. The growing and inevitable "transplant tourism" industry, and even shadier organ brokers, are the kidney equivalents of back-alley abortionists.

Speaking of back-alley abortionists, it's easy in today's world to think that physicians who secretly performed abortions were progressive-minded guys who believed in woman having control over their bodies. And maybe some of them were, but a lot of them were just plain criminals. They would routinely fake pregnancy tests, telling every woman she was pregnant and needed an abortion. And just like any other black-market product, there was organized crime involvement. I'm sure the same thing is happening with organ donations.

But even talking about incentives is taboo to some self-styled patient advocates. On Monday, the American Enterprise Institute will hold a conference in Washington on incentive-based transplant reforms. (It's organized by my kidney recipient, a physician and health-policy scholar at the institute.) When the National Kidney Foundation heard about the conference, its chief executive, John Davis, complained to the institute's president, "We don't see how an AEI forum would contribute substantively to debate on this issue."

Davis' group adamantly opposes donor compensation, lobbying against even experimental programs and small tax credits. It's as though the National Parkinson Foundation opposed stem cell research, or thought researchers should work for free.

That's the thing that gets me. Everyone else, from the doctors and nurses who do the work to the staff at the transplant center, gets paid. Only the person providing the kidney is expected to work for free.

[Part 2 is now up.]