Market Principles Should Be Introduced into Blood Donation

People with rare blood types often face great difficulty receiving transfusions when they need emergency surgery or are injured in an accident. It is not hard to find posts online requesting directed blood donations for someone with a rare blood type. There are many heartwarming stories of people pulling through safely thanks to such designated donations, but many tragic cases that go unseen must also have occurred. It is reasonable to infer that some people surely died or suffered severe disabilities because they could not receive a blood transfusion. If one considers only the visible cause, then when a person with a rare blood type suffers harm because they cannot receive a transfusion, the reason is a shortage of blood. But if one examines the true underlying cause, it becomes clear that the current blood donation system is institutionally regulated in such a way that supply cannot keep up with demand from the outset.

In Korea, the blood donation system operates entirely on a 100% unpaid basis and is monopolistically managed by the Korean Red Cross. The buying and selling of blood—so-called “paid blood donation”—is strictly prohibited. In effect, the government is forcing people to donate blood purely out of goodwill, with virtually no compensation of any kind. The rewards offered—idol CDs, free movie tickets, Choco Pies, and the like—are grossly inadequate compared to the value of blood.

Compared even with neighboring countries, Korea has one of the most seriously deficient blood donation systems. As of 2017, 71% of blood donors in Korea were in their teens or twenties. Given the population share of those age groups, this is an excessively high figure. In practical terms, it would hardly be an exaggeration to say that people in their thirties and older simply do not donate blood at all. By contrast, in neighboring Japan, the share of blood donors in their teens and twenties is 21.6%, which is a normal proportion, and Taiwan is similar at 33%.

In Korea, middle and high school students receive credit for 3 to 4 hours of volunteer service for each blood donation. Soldiers also donate frequently because they receive Choco Pies and Mong Shel in boot camp, and after assignment to their units they are excused from some work hours if they donate. In other words, it is no exaggeration to say that only secondary school students and soldiers donate blood, because they alone can receive compensation of substantial value. As for other groups, donating blood offers no real benefit at all, so almost no one donates except for a tiny minority with an unusually strong sense of justice. In effect, Korea’s medical blood supply is sustained, quite literally, by parasitically feeding on the blood and flesh of teenage students and soldiers in their twenties.

Despite maintaining such an exploitative blood donation system, Korea still spends 70 billion won in tax revenue every year importing blood for medical use from overseas. This is nothing less than a catastrophic case of fatal government failure—one that simultaneously achieves both exploitation and wasteful tax spending.

The blood supply will become even harder to secure in the future. As the share of the population in their teens and twenties continues to shrink due to the demographic cliff brought about by the government itself, this exploitative blood donation system will become impossible to sustain, and even more tax money will have to be spent procuring blood from abroad. A time may come when not only those with rare blood types, but also people with common blood types, face life-threatening situations in medical settings because blood is simply unavailable.

To resolve these contradictions and difficulties, the system of paid blood donation must be revived. The best solution would be to fully liberalize and privatize the blood market. If that is difficult in the short term, then at the very least the government should purchase blood from private individuals and supply it to the medical market. Some worry that introducing a paid blood donation system would sharply increase the medical cost burden for patients who require regular transfusions. I am not a medical industry professional, so I cannot make a detailed empirical argument based on concrete data, but my personal thoughts on this objection are as follows:

1. If blood prices rise sharply after the introduction of a paid blood donation system, that would mean either that the government’s version of such a system still failed to properly match supply and demand, or that bureaucratic problems prevented the market from fully delivering its flexible price-adjustment effects. If so, the solution is to liberalize and privatize the blood market to the point where supply and demand can reach equilibrium and an appropriate market price can emerge—not to keep forcibly suppressing prices through exploitation and subsidies as is done now.

2. At a more fundamental level, it is necessary to consider whether the price patients pay for blood is not already excessively low. It is also necessary to consider whether, as a result of the government having half-socialized the medical market, other medical costs have increased, making the payment of a fair price for blood feel like a severe burden. In that case, the problem is not the payment of a fair price for blood, but rather the rise in other medical costs caused by government intervention, and therefore government intervention in the medical market should be abolished.

3. It is also necessary to consider whether business cycles and inflation caused by government intervention and the central bank have reduced real income, thereby making medical expenses excessively burdensome relative to income. In that case, the greater problem is not the potential increase in blood prices resulting from the introduction of paid blood donation, but the collapse in real income to the point that people can no longer afford blood prices. Therefore, government intervention and the central bank should be abolished.

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Original title: 현혈에 시장원리를 도입해야 한다

Author: Kyeong-hoon Kim

Date: 2021-05-24

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=10&idx=23726