Chapter 9, Problem 5DQ

To determine

The average waiting time on transplants lists is about five years for kidneys (although this is expected to rise sharply due to the rising incidence of diabetes, a major cause of kidney damage). Many of these people waiting must undergo dialysis, at a cost of $90,000 per year for the dialysis, plus another $30,000 per year for related medical expenses. These costs are paid for by in part by private insurance, but mostly by Medicare or Medicaid. Suppose that if payment for organs were permitted, the transplant waiting time was shortened by four years, and that for the average patient, the result was forty-eight months less on dialysis. At what price for a kidney would a system of paying for organs be a “break-even” proposition for insurers? Show all calculations and explain your reasoning.

Concept Introduction:

Cost refers to that particular amount which is forgiven by a firm or an individual to acquire an asset or a service.