Prepared by

Christopher J. Conover

Emily P. Zeitler

Center for Health Policy, Law and Management

Duke University

Under contract to the

Agency for Healthcare Research and Quality

With funding from ASPE/DALTCP

May 2004

Draft: Do Not Circulate without Author Permission

NATIONAL ORGAN TRANSPLANT ACT

Background

Rationale. To ensure an equitable distribution of organs for transplant, Congress established a regionalized system of organ distribution in 1984. However, despite this system, by the mid-1990’s, more than 4,000 potential transplant patients still died each year waiting for organs. With the objective of increasing cadaveric organ transplants, further rules were developed to ensure that families of dying patients were better informed about the potential benefits of organ donations.

Statutory Authority. The National Organ Transplant Act of 1984 created the Organ Procurement and Transplantation Network (OPTN); two major sets of amendments have been enacted subsequently. The most recent set of final rules for OPTN were issued April 2, 1998 (63 FR 16296) and became effective on July 1, 1998. There are parallel state laws governing organ transplants, but the most recent rules for OPTN for the first time included a preemption provision so that states could not interfere with OPTN policies that require organ sharing across state lines. Rules regarding hospital notification of families of potential donors were issued on June 22, 1998 (63 FR 33856) and became effective August 21, 1998.

Key Elements. OPTN provides a regionalized system of organ distribution using a system of Organ Procurement Organizations (OPOs) which by law have a monopoly in the geographic areas they cover. A central feature of the National Organ Transplant Act of 1984 was a prohibition on the buying or selling of human organs for transplantation; in contrast, most state laws governing organ donations contained no such prohibition (Kaserman and Barnett 2002). The notification regulations require hospitals to have an agreement with an Organ Procurement Organization (OPO) under which the hospital would contact the OPO about patients who die or whose death is imminent in the hospital (42 CFR Part 482). The rule further requires hospitals to notify the family of each potential donors of their option to donate tissue or organs and to educate staff about these issues.

Scope. The rules regarding organ transplants and notification of potential donor families cover all hospitals participating in Medicare, nearly 4,900 short-term general hospitals nationwide.

Enforcement. OPTN is a private, not-for-profit organization designated by the Secretary of Health and Human Services; regulations provide for specified representation of various groups on the Board of Directors. Funding for OPTN is provided through HRSA’s Office of Special Programs. However, CMS also is indirectly responsible for enforcement of these rules, since the standard Medicare Conditions of Participation for hospitals require them to establish arrangements with their local OPO and notify families of potential donors. Failure to comply with these rules thus would jeopardize Medicare and Medicaid funding for transplant hospitals. In addition, buying or selling organs is designated as a felony offense.

Theoretical Impact

Costs. The ban on organ sales reduces the number of organs available for transplant and results in the death or worse health status for those who otherwise might have benefited from these organs. The notification rules impose process requirements on all hospitals. The rules are designed to increase organ donations; this increases the annual number of transplants performed, thereby increasing costs for hospital and physician services.

Benefits. Beneficiaries of additional transplants resulting from mandatory notification requirements gain added years of life and/or higher quality of life.

Empirical Evidence

Government Regulatory Costs. HRSA’s appropriation for organ transplants was $19.983 million in 2002. Because OPO arrangements and patient notification requirements for hospitals are part of COPs with no separate administrative structure to monitor and enforce compliance, there are no figures on the added administrative costs related to these rules.
Industry Compliance Costs: Administrative Costs. The official HHS estimate for the mandatory patient notification rules projects 575,000 annual hours related to notification of families.
Industry Compliance Costs: New Transplants. The official HHS estimate projected that notification requirements would increase the number of transplants by roughly 800 per year, generating new medical costs of $280 million per year. We found no literature documenting the retrospective impact of these rules.
Indirect Costs: Health Losses. A recent analysis of the impact of the ban on organ sales estimates that the social welfare loss as it relates to kidney transplants was $320 million in 1998 (Kaserman and Barnett 2002). The authors guesstimate that the equivalent social welfare losses for all solid organ transplants might exceed $1 billion a year.
Indirect Benefits: Mortality Benefits. The Department of Health and Human Services estimates that mandatory notification requirements would result in an increase in life years of roughly 10,000 annually, resulting in more than $1.1 billion in benefits (using a conservative estimate of $116,000 per life year developed in the early 1990’s).

Net Assessment

In light of the limited evidence on transplant notification requirements, we have calculated the regulatory costs in the following fashion (minimum and maximum parameter estimates are shown in parentheses: full details of methods and sources are in Table C-8).

Government Regulatory Costs. We use the HRSA figure for OPTN costs and do not attempt to estimate the marginal costs to CMS associated with enforcement of organ transplant-related rules.
Industry Compliance Costs: Administrative Costs. We multiplied the annual time burden of notification requirements times the estimated hourly compensation cost in hospitals for 2002 ($19.68).
Industry Compliance Costs: New Transplants. We inflated the official estimate of $280 million in additional medical costs for new transplants to 2002 using the increase in national health expenditures between 1998-2002.
Indirect Costs: Health Losses. We use the Kaserman and Barnett estimate of $1 billion, allocating the $320 million for kidney transplants to morbidity gains (since the alternative to transplant is dialysis rather than certain death) and the residual $680 to mortality losses. Both figures were inflated to 2002 using the increase in national health expenditures between 1998-2002.
Indirect Benefits: Mortality Benefits. We inflated the official estimate of 800 annual additional transplants to 2002 taking into account population growth, converted this to a projected estimate of life years gained using ???? and multiplied the result times the value of a statistical life year (VSLY) in the general population (see Table F-2 for derivation of VSLY).
Social Welfare Losses: Efficiency Losses from Tax Collection. To account for the efficiency losses associated with raising taxes to pay for government regulatory costs, we multiply the latter times the marginal cost of income tax collections (see Table B-1 for how these costs are calculated).

Social Welfare Losses: Efficiency Losses from Regulatory Costs. All industry compliance costs, including additional uncompensated care induced by pools are presumed to be roughly equivalent to an excise tax, i.e., raising prices and reducing demand/output correspondingly. We therefore multiply these costs times the marginal excess burden associated with output taxes, using 21% (15%, 28%) as the expected value of MEB (see Table B-1 for details of how MEB is calculated).

In total the expected cost of organ transplant regulations is $1,705 million (1,653, 1,785) while the expected benefits are $1,807 million (280, 4,643).

Acronyms

OPO Organ Procurement Organization

CMS ??

VSLY Value of a Statistical Life Year

References

U.S. Department of Health and Human Services. 1998. Organ Procurement and Transplantation Network. Federal Register 63, no. 63: 16296.