A frequent topic of conversation lately over at The League is compensation for organ donors. Sally Satel, a recipient of an uncompensated donation, recently made the case for compensated donation at Slate. This post isn’t about the merits of that particular argument. Rather, it’s about this passage:

Kidneys can be donated by the living. Indeed, roughly half of all donors are friends or loved ones of recipients. To induce more strangers to save a life, compensation could again be provided by a third party and overseen by the government. Because bidding and private buying would not be permitted, available organs would be distributed to the next in line—not just to the wealthy. By providing in-kind rewards—such as a down payment on a house, a contribution to a retirement fund, or lifetime health insurance—the program would not be attractive to desperate people who might otherwise rush to donate on the promise of a large sum of instant cash.

One of the concerns about compensated donorship is that it would end up preying on the poor and desperate. I have my doubts that it would, but it’s a concern sincerely felt. And there are a number of reasons you would want to keep financially desperate people out of the loop, not the least of which is that they’d be more likely to lie on their application so that they would be accepted. Satel’s proposal would indeed sidestep this by forgoing the promise of cash and in favor of things that would be more appealing to middle class folks and less appealing to the hard-up.

As I said, though, this isn’t about compensated donation specifically. Rather, it’s about some of these incentives and why I am less than sure about them.

By virtue of being (until last Friday) a physician trained for rural medicine, Clancy is eligible for all sorts of loan repayment programs. Which, since we’re in the upper five-digits in debt, sounds nice. One problem with this, though, is that the pay in the places that offer these incentives are typically low and by taking a job in a less rural, wealthier place would mean more money with which to pay back the student loans to begin with. You could up the student loan repayment, except for a couple of things.

First, the faster the student loan is repaid, the quicker the doctor is likely to leave. Which sort of becomes self-defeating, in a way. I mean, when the repayment is done, they actually take a hit in pay.

The second is that programs like this encourage weird financial behavior. It would be in the Himmelreich-Truman household’s best interest to pay off the loans as quickly as we can. Wouldn’t it? The bank gets its money and we don’t have to worry about interest payments and everybody is happy. It doesn’t make sense to hold on to the money while owing others… except that under these programs it starts to make sense.

Let’s say that we cut a check right now for the entire balance of the student loan debt. But then, the job she next takes has a loan repayment system. Well, that money is not transferrable into cash. So, in essence, by having made good on our debt, we’d be forgoing future income. Yet if we don’t pay off the debt, or as much as possible, and there is no repayment system in whichever job she takes, then that’s cost us money, too.

Yet if loan repayment were converted into cash, it would become even more apparent that the inducement is insufficient for the money-motivated. And, of course, it would also end up going to those who aren’t in it for the inducement who know just shrug off the student loan repayments that they aren’t getting. And lastly, in the same way that we like actual gifts better than cash at Christmastime, there is something nice about getting something specific. So maybe, as inefficient as it is, loan repayment works as well as the alternative anyway.

At least, until or unless we come up with a system that more genuinely and thoroughly rewards physicians for working in places that physicians don’t generally want to work. That would require an overall that the PPACA debate suggests that we are just not ready for.


Category: Market

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5 Responses to Targeted Compensation

  1. SFG says:

    OK, since you’re a Republican, free-market question: why don’t salaries just rise until the docs want to come out there? The rural areas don’t have the cash in the first place, I’d guess?

    • trumwill says:

      The market system doesn’t really apply to medicine. The shortage of primary care physicians hasn’t really resulted in the pay boost that the market would suggest. Rates are determined by broad negotiations, and often responsive to government rates for Medicare and Medicaid.

      • Rates are determined by broad negotiations, and often responsive to government rates for Medicare and Medicaid.

        It’s interesting that you say that because supposedly, there’s not this online meme of doctors dropping out of insurance and Medicare/caid to become “cash only” doctors. I’ve argued that it’s an over hyped meme and caters only to those who can afford the fees, but one of the people who mentions it the most argues that it’s “cheap” for the end user and profitable for the doctor as they avoid paperwork and the perpetual wait for payment.

  2. First, the faster the student loan is repaid, the quicker the doctor is likely to leave. Which sort of becomes self-defeating, in a way. I mean, when the repayment is done, they actually take a hit in pay.

    I suspect that the idea is that it’s better to have these doctors show up in the first place for a few years than to have them never show up at all.

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