Targeted Compensation

A frequent topic of conversation lately here 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 (so please, let’s not rehash it). 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.

Will Truman

Will Truman is the Editor-in-Chief of Ordinary Times. He is also on Twitter.


  1. Well, you usually get what you incentivize. So if you’re offering debt forgiveness for working in an undersirable area, it’s natural that folks will leave when the incentive is removed.

    That’s the trouble with incentives. Unless you’re very carefull, some unintended consequences might bop you on the head. Maybe more pay should be offered vs debt forgiveness, or a switch from debt forgivness to more pay after the loan?

  2. Actually, my main concern with compensated donation isn’t that desperate poor people would sell their organs, although thats also a concern, but that non-rich people would be unable to get transplants unless a friend or relative donated theirs because they could not afford the market rate. I like the idea of organ donations being paid in kind or at least indirectly say through the elimination of debt or several mortgage payments though.

    • How is it different from compensating everybody else involved in the (already quite expensive) process, then?

  3. I hope this isn’t too obvious, but the proposal will help some number of organ recipients on the margin. It will help no people whose chief need in life is a cash payment.

    As such, it’s slightly inferior to paying cash, which can also be used for all those other worthy purposes.

    • I’m with Jason. Straight-up cash transfers are generally (with some exceptions) better/more efficient/more useful than transfers in kind.

      This probably applies to debt repayment/forgiveness incentives, though, not being an expert in the area, there may be some nuances that make dept repayment programs at least as valuable as cash transfers.

  4. Paying for human flesh offends me in ways I can’t quite put in words. Logically, I shouldn’t feel this way, I know. It’s deeply squicky. It trespasses into places where ethical proscriptions forbid one person to buy another. Just how much of someone can be sold?

    I understand I don’t have any rational basis for these feelings. Maybe I can be talked out of them.

    • Don’t worry about it. By the time we sort out the ethics of this, they’ll be able to print organs for you. Fully compatible organs, made from stem cells created off skin samples they took from you. With many congenital defects and genetic anomalies corrected.

      Then we’ll argue over cost and who should pay for it.

  5. My main theory about living in undesirable areas was that it pay a percentage (up to 100% if there are enough years in the same place). That would help a doctor put down roots if that’s what folks were after and, if they weren’t, hey. They had 5 or 7 years of a doctor… to be replaced by another doctor who wants his/her debts paid off. (I also really backloaded the debt repayment in my theory. You had to be there the whole time to get the majority of the benefit.)

    My main question about the current system: is it resulting in *MORE* doctors, all things considered, or fewer? (Because if it’s resulting in more, well… let’s not mess with a good thing. If it’s resulting in fewer, maybe we should start tinkering.)

  6. If that money that goes to loan repayment were put into making other improvements to the area that might more naturally entice doctors (and others!) to the area, do you think it’d be more or less effective?

    Montana and Wyoming each have zero Chipotles. Utah has three.


  7. Colorado is the home of Chipotle, but rural Colorado has the same problem with lack of medical practitioners. Still, the point is a valid one. Doctors and nurses have spent from four to eight years in training, almost invariably in a situation where there are a rich set of amenities. They may not have had either the time or income to enjoy all of those while they were in training, but expectations were set. It is hard for an area lacking in almost all of the urban amenities to attract medical providers. Heck, it’s difficult for them to attract professionals of almost any sort.

    Note that when I say “amenities”, I’m using that word to cover an enormous range of possible things. What people want in the way of amenities varies; one of the advantages of urban areas is that they offer something for everyone. Well, except for an authentic small-town experience — and one aspect of that is the lack of amenities. I used to say that I could go back to living in an authentic small town, but I have come to doubt that I’d last more than a couple of years.

    • This comment was supposed to be attached to Kazzy’s, but I apparently didn’t click the proper button at some point.

    • It’d be interesting to look if certain professions correlated to certain desired amenities… e.g., doctors tend to prefer to live and work near Chipotles while bankers tend to prefer to live and work near IHOPs. You’d be unlikely to find any strong correlations, but who knows. When I went to graduate school, at a school devoted to progressive graduate education, the PinkBerry and yoga studio right next door did gangbusters. A school full of young women would do that, I suppose.

      Also, regarding commenting, I find that sometimes hitting “Reply” on a specific comment drops me down to the bottom of the page to start a new thread. Hard to notice if you’re not paying attention, especially if you are replying to the bottom comment anyway. Things are getting glitchy…

      • Burt always makes it sound like lawyers and booze go hand-in-hand. I have been spoiled — inside a circle with a radius of 15 miles centered on my suburban home outside Denver, there are probably 30 microbreweries. Some are so-so and some of them are quite good. At worst, the beer is fresh and unpasteurized. The choices for beer the last time I was drinking in a small town were such that I opted for Diet 7-Up instead.

        • There’s a third link in the middle of that chain. Here’s the breakdown:

          Practicing law –> stress –> booze.

          • From what I’ve heard, I thought the third link in the chain was marijuana.
            (not even mentioning the lawyers on cocaine. they’re “different”).

        • When I visited Denver for work, I was told it was the Napa of Microbrews. I found this an apt description.

          What I was not told was that it was full of hipsters.

          • I hadn’t noticed. I assume that it’s for one of two reasons: (1) The hipsters don’t frequent the suburban microbreweries that I frequent, or (2) having raised two teenagers, I was trained by experts to ignore annoying people.

          • I was down by the convention center, for what that’s worth.

            My original impression of Denver was a rustic city in the mountains. I came to learn that it was a relatively cosmopolitan city at the foot of the mountains. Many of the hipsters seemed transplants… people who said they were going to move out west and live in the mountains, but who couldn’t give up on all the trappings of home. So rather than actually move TO the mountains they moved NEAR the mountains and co-opted a little part of the city to form Williamsburg West.

            But the beer was fabulous. I spent my few nights there saddling up to a bar and asking the bartender to serve me a local IPA or pale ale. For the next round, I’d say the same thing but with the caveat that it be different than the previous one. There was no shortage of delicious, local brews available on tap.

          • Many of the hipsters seemed transplants… people who said they were going to move out west and live in the mountains, but who couldn’t give up on all the trappings of home.

            Much of Colorado’s population is transplants. When I moved here with my wife and kids early in 1988, the state population was about 3.1 million. As of today, the estimate is about 5.3 million. The bulk of the growth has been in the Front Range urban area, the strip of (mostly) prairie extending perhaps 20 miles out from the foothills, from Colorado Springs on the south to Fort Collins on the north. The area is, overall, a hotbed for start-ups in a variety of fields, so attracts lots of people with degrees. In education circles, it’s called the “Colorado Paradox.” Our rates for high-school graduation and going on to college are very so-so. But we still have one of the most-educated workforces in the country, because so many people who get their degree elsewhere move here.

    • I ran this through rot13 just to be sure. We’re getting a lot of spam these days so I’m wondering if this was a deliberate post by dexter.

  8. I think the idea, for student loan repayment, is that it makes certain jobs more economically feasible for people who want to do them but would otherwise be reluctant to do so due to the burden of student loans. Like lawyers who want to be public defenders but can’t afford to do so while paying off law school debt. This has two advantages over a straight cash subsidy. First, you get the people who really want to be there. Second, once their loans are paid off, you don’t have to subsidize them anymore, and they may stay anyway.

    It would be in the Himmelreich-Truman household’s best interest to pay off the loans as quickly as we can. Wouldn’t it?

    Maybe, maybe not. I never bothered paying off my student loans in full just because the subsidized interest rate was so low. I feel like I should send Elizabeth Warren a thank-you note, along with a copy of my tax return and balance statement from my brokerage account.

    That said, this particular proposal doesn’t seem like too much of a step down from a cash payment. Pretty much anyone can use a contribution to a retirement fund, right? For people who are already contributing to their retirement funds, it’s literally as good as cash, since they can just use it to replace their own contributions.

    Disqualifying people who need the money the most specifically because they need it the most is of course completely insane, but it’s a common enough form of insanity that it may be politically necessary to pander to it. And there’s a better case to be made for disqualifying people with low future orientation, partly for their own good and partly because they’re likely to have lower-quality organs on average.

    I’m not going to say that this is better than a regular cash transfer, necessarily, but I don’t think it’s all that much worse.

Comments are closed.