By Bill Frezza
October 19, 2012 | The Skeptical Outsider Guest Column | Few perks of wealth are more widely demonized than the private jet. Yet these very symbols of power and luxury could save health care dollars by being placed at the disposal of the poor. In what alternate universe is this possible, you ask?
In today’s Rube Goldberg U.S. health care market, where else?
OrganJet is the brainchild of a Carnegie Mellon professor whose specialty is logistics and supply chain management. He has spent his career solving complex, stochastic inventory management problems, seeking more efficient ways to match supply and demand. After moving on from his prior startup and helping a client schedule time-shared jet aircraft, he turned his attention to the chaotic market for organ transplantation. More specifically, he studied the way deceased-donor kidney donations are matched with patients awaiting transplant, using the same math that tells supermarket chains how many strawberry Pop Tarts they should keep in inventory at their regional distribution centers.
According to the U.S. Department of Health and Human Services, 93,860 kidney failure patients are currently sitting on waiting lists. Almost all receive dialysis treatment as they hope and pray to get a kidney from an accident victim who had checked the organ donor box on their driver’s license application. Supply doesn’t come close to meeting demand, which is the invariable outcome when a maximum price on something is set by law. In this case the price is zero, as the American electorate has decided not to extend freedom of choice to prospective organ donors when it comes to accepting compensation paid to their estate. Because the only incentive to check the box is altruism, not enough people do it.
What the generous American electorate has also done, through a Social Security system that is rapidly headed toward bankruptcy, is to promise to provide taxpayer-funded dialysis treatment to any kidney failure patient regardless of their income. This costs approximately $77,000 per patient per year. That means we are spending about $7.3 billion a year to support patients on waiting lists, on top of an additional $13 billion for kidney failure patients deemed ineligible for transplant. There is clearly a lot of value to be captured if transplant waiting times can be shortened, not to mention the fact that thousands of patients die every year waiting for a kidney that never arrives, their bodies ravaged by the harsh effects of dialysis.
The market for deceased-donor kidneys is necessarily regional for the simple reason that in order to remain viable, kidneys have to be harvested and transplanted in four to six hours. Waiting times for a suitable match at various transplant centers vary dramatically, from as little as nine months in Wisconsin to eight years in big cities like Boston and Los Angeles. Aside from the inequity this disparity causes, the statistics of successfully matching donors to recipients are negatively impacted due to the segmentation of donor and recipient pools. This results in 2,000 transplantable kidneys going to waste every year, due to cases in which no local match is found even though a distant match might have been achievable.
Wealthy patients with access to private jet service often list in multiple cities hoping that a match will come up somewhere. Such flexibility is not available to ordinary people. That is, until OrganJet came along, a service that contracts with commercial private time-share jet fleets, potentially enabling everyone waiting for a kidney to multiple list.
The cosmetics of putting a fleet of private jets at the disposal of patients getting free (that is, taxpayer supported) medical care may be off-putting, but the math is irrefutable. A private jet flight costs from $15,000 to $25,000—less than the cost of four months of dialysis payments. Eliminate the wasted kidney problem by expanding the match pool and you save the annual costs of keeping that many more patients on dialysis until they die. Yes, the transplant surgery itself, as well as the post operative care, are not free, but because patients on dialysis die slowly and expensively rather than quickly and cheaply, flying them around really does pay for itself due to the fact that average waiting times can be reduced by three years.
It’s one thing to demonstrate the math, but another to find a member of Congress willing to stand up and sponsor legislation to provide private jets for the poor. To get around that problem, OrganJet has established a separate 501(c)3 charitable foundation called Guardian Wings, using a first-of-its-kind hybrid legal structure that will allow tax deductible donations to pay for the jet flights for patients without the means or the insurance.
It’s a complicated solution to a problem caused by the refusal of the American public to allow organ donors or their estates to be compensated (perhaps put off by the macabre market for live organs that has sprung up in poor countries). Even OrganJet’s founder Sridhar Tayur describes his solution as a band-aid. And yet, it both works economically and lies within the great American tradition of finding solutions to problems we’ve ourselves created—even one as hopelessly complicated as the legal, political, and fiscal morass that now passes for our health care system.
* Disclosure: my firm was the lead investor in Sridhar Tayur’s prior venture, though not OrganJet.
Bill Frezza is a Fellow at the Competitive Enterprise Institute and a Boston-based venture capitalist. He can be reached at email@example.com. If you would like to subscribe to his weekly column drop a note to firstname.lastname@example.org.