The U.S. Kidney Exchange System and Potential Reforms
There are nearly 100,000 people on the kidney transplant waitlist in the United States. Five percent of those on the waitlist die each year waiting for a kidney. Is there a shortage of available donors? Or are the glaring statistics a result of a growing mortality rate in kidney ailments?
Though the kidney exchange system represents 15% of living-donor kidney transplants, it has long reaching effects in the organ transplant market. In their analysis, Agarwal et al argue that the inefficiency of the U.S. kidney exchange market comes from market failures in which hospitals fail to maximize patient and social welfare. Most U.S. hospitals do not participate in a national platform of matching donors and recipients. Instead, they operate within their health system, matching “easy” donors to “easy” recipients. This is because hospitals have incentive to reduce their administrative costs, a method highly encouraged by insurers. Even though hospitals may maximize the welfare of patients within their hospital, the inefficiency of the matching system results in a waste of 800 kidney exchange transplants performed annually.
As discussed in class and the video lectures, “players” can be motivated to choose strategies that are not initially and individually beneficial but maximize social welfare. In the traffic example, it is explained that tolls and subsidies can be used to mitigate traffic congestion and help the system reach equilibrium in a socially optimal manner. The same logic can apply here and is supported by the authors. Agarwal et al argue that subsidies from Medicare and private payers and mandates are necessary to change our organ transplant system and establish an effective national platform. https://economics.mit.edu/files/13724