The government monopoly on donated kidneys is killing Americans

An estimated 12 people die every day while waiting for a kidney transplant. At least some of these deaths are preventable, and monopolistic government contractors bear the bulk of the blame.

“Monopolies don’t work, and government-sponsored monopolies are even worse,” says Jennifer Erickson, a former Obama White House staffer who now works as a senior fellow at the Federation of American Scientists.

To the new season of Reason's Podcast Why we can't have nice thingsErickson explains how Congress's good intentions led to a flawed system that resisted reform for decades. In the 1980s, as the development of immunosuppressive drugs made organ transplants easier, Congress passed a law that created about 50 regional monopolies in which organ procurement organizations (OPOs) had the exclusive right to collect donated organs and distribute them to needy recipients. Supervision of the regional monopolies is carried out by a national contractor, the United Network for Organ Sharing (UNOS).

Many of these OPOs don't do their jobs very well. A 2019 report by public health nonprofit Organize found that only six of the regional OPOs managed to collect at least 50 percent of donateable organs – organs from deceased people who had agreed to be donors – in their territory .

All told, more than 17,000 kidneys (as well as thousands of other organs) are wasted each year instead of finding their way to dialysis patients in need of a replacement. That’s a huge opportunity cost. And because there is no competition between OPOs, if you are unfortunate enough to need an organ and live in an area where there is a poorly performing OPO, you may never get one.

Increasing the number of donated kidneys available would save lives and also save taxpayers a lot of money. According to a University of Pennsylvania report, full use of the organ donation system would mean $13 billion in tax savings and 25,000 lives saved or improved. A 20 percent improvement over the status quo would mean improving the lives of 6,000 people and saving $2.6 billion.

Because there is no competition, underperforming OPOs have little incentive to improve. There was a lack of government oversight: In 2012, Alabama Organ Center executives were convicted of defrauding taxpayers by artificially inflating costs and taking kickbacks. The organization changed its name to Legacy of Hope, but never lost its exclusive contract.

The problems don't stop there. The same law that created the regional monopolies also required that the costs of organ donations be fully reimbursed by insurance companies and the federal government. OPOs therefore have no incentive to control costs – even if those costs have little or nothing to do with their core mission.

OneLegacy, the OPO with a monopoly in Southern California, was criticized by an inspector general report after it spent $327,000 on Rose Bowl tickets and other events in 2006. Some of these costs were billed to taxpayers through Medicare.

At a Senate hearing in 2021, the president and CEO of the Nevada Donor Network admitted that the group holds season tickets to the NFL's Las Vegas Raiders and the NHL's Vegas Golden Knights and spent money on several board retreats to California wine country has.

There is hope that the situation could improve. New federal regulations proposed during the Trump administration and implemented by the Biden administration mean that for the first time in 40 years, underperforming OPOs could lose their lucrative contracts.

“The federal government must replace failing organ procurement organizations with high-performing organizations that serve the American people, and it must do so now,” Erickson said. “We should never be in a situation where there is such a monopoly without responsibility. There must be open, fair and competitive contracting, and if someone new comes in and lets the American people down, they should be kicked out too.”

New developments in medical technology could also improve the supply problem for Americans in need of a new kidney. In March, the world's first genetically modified pig kidney was successfully transplanted into a human.

But we will continue to need human donors for the foreseeable future. Americans are a generous bunch – the overwhelming majority of us support organ donation and are willing to be donors when we die. Government contractors should not be the bottleneck that prevents this largesse from being realized.