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Economic efficiency is a criterion commonly used in economic analyses to establish an order of preference between different policy alternatives. However, in many societal situations where decisions on policy are made it would seem that this criterion is not the one most often prevails. This paper examines a disgust or repugnance factor, and examines how this factor operates as a restriction on certain transactions in the market and the consequences of these restrictions. This repugnance concept, developed by Al Roth (2007), suggests that some transactions, such as the purchase and sale of kidneys for transplants are illegal simply because a sufficient number of people find it repugnant. This paper demonstrates that the level of the repugnant reaction depends on circumstances and is closely associated with the social cost imposed by the development, prohibition or regulation of a kidney transplant market.

This chapter introduces the concept of the need for organized healthcare rationing after first discussing the dysfunctions of the healthcare system in the United States: its disorder, gross inefficiency, inequities, failure to offer insurance to vast numbers of Americans, and enormous (and escalating) costs. It introduces the topic of established open and overt rationing systems in the US, such as that for solid organ transplantation, and suggests that they are accepted – even embraced – by most of the public. If rationing is believed to be anathema, why is this so? It begins an argument that there may be features of the transplant (and other rationing schemes) that contribute to their acceptability, despite the fact that people who fail to receive an organ almost inevitably die.

This chapter initiates the main argument by describing in detail three systems of open, formal rationing in American healthcare: solid organ transplantation, scarce drug allocation, and the Oregon Health Plan (created in the late 1980s to improve and expand medical care for poor residents of the state). While there are clear differences between the three approaches, as well as dissimilar goals and aims, they bear striking similarities in several crucial domains. Remarkably, all three systems have been accepted not only by the people immediately affected (patients), but also by the public in general, indicating that rationing per se may not be as intolerable as suspected.