By Eric Crampton 28/08/2015


We this week released Elisabeth Prasad’s report running some of the numbers on whether compensating live kidney donors makes sense. She finds that the typical kidney transplant saves the Ministry of Health on net about $125,000 over the longer term: dialysis is expensive.

Chris Bishop’s Member’s bill passed first reading and is off to committee. It increases compensation to live donors for lost wages from the current amounts offered by Work & Income (which range to $350 per week for up to 12 weeks) to 80% of the donor’s wage. The average wage in New Zealand is about $1000.

Compensating donors so that more can afford to make that gift makes sense, on a straight fiscal analysis, if it brings enough new organs into the system. If new nobody becomes a donor because of the increased payment, then we’ve likely still done the right thing in helping donors, but it won’t save the government money.

So here’s the very simple maths on it.

Suppose each new transplant saves the government $125,000 less the compensation paid to the donor. Suppose that, currently, compensation averages $300/week for donors and lasts 8 weeks. The government then is currently $122,600 better off with each transplant.

Suppose that we move to full compensation. On average, donors earn the average wage. If they also take 8 weeks at $1000/week, the government is then $117,000 better off with each transplant.

If the live donation rate doesn’t change, the government is out $5600 per transplant as compared to the status quo. If there is at least one new transplant for every 21.9 existing transplants, then the move is fiscally neutral. There were 72 kidney transplants from living donors in 2014. So if three more people are able to donate a kidney thanks to the increase in compensation, the move saves lives and is fiscally neutral. If four more people are able to donate a kidney thanks to the increase in compensation, the move saves lives and saves money.

Suppose we only get one new donor. One. In that case the government pays $403,200 to donors who would have donated anyway and $8000 to a donor who wouldn’t have for a total of $411,200 in compensation. The net cost to MoH is then $288,600 for that single kidney – because they’ve had to compensate all the other donors at a higher rate. The recipient gets, in the indicative case of a 50 year old male, an additional 7.6 quality-adjusted life-years. The cost to MoH is then just under $38,000 per QALY.

In the worst-case scenario, where zero new transplants happen, the government is out just over $400,000 and a pile of live organ donors who have helped to save others’ lives enjoy better compensation for their time out of work. In the break-even scenario, for the government, three more lives are saved when three donors are able to make the gift. And each donation after that saves the government rather a bit of money – while saving lives and doing right by the donors.

And note that all of this is predicated on my preferred 100% compensation regime. The break-even point using Bishop’s 80% figure will be lower. The break-even point will also be lower if people take only 4 weeks in recuperation rather than 8.

Elisabeth’s report, and her Masters thesis on the topic, are here. I was on Radio NZ’s Nights this week on the topic; you can listen here. And pick up a copy of this week’s NBR for my article on it (a pre-pub here).