What Do an Underfunded 401(k) and a Dialysis Patient Have in Common?

Both of them would be better off if the default option were switched to opt-out as opposed to opt-in. This is hardly surprising but, sadly, it is still news.

Let me explain.

One of the reasons that some people don’t contribute to their 401(k) plans is because they usually have to “opt in” to the plan — i.e., actively choose to open a plan, select their contribution percentage, make allocation decisions, etc. Faced with these hassles, a lot of people simple choose not to open a plan. If, however, the default is switched to “opt-out” — if they are automatically signed up for the 401(k) when they start working for a company, with an option to cancel — savings rates are significantly increased. This simple policy change — whose result, again, is hardly surprising — has become increasingly common, thanks in large part to the research of behavioral economists like David Laibson and Richard Thaler.

Now for the dialysis patient. Let’s say she’s on a waiting list for a new kidney. But there is a good chance she’ll die before receiving a kidney, since far too few organs are being donated through traditional means to satisfy the demand. What happens, however, if instead of assuming that people do not wish to donate their organs in the event of an untimely death, you assume that they do? The latter option is known as presumed consent, and is practiced in some European countries. How well does it work? The current edition of the British Medical Journal contains an informative debate on this subject between two experts in the field. Here’s how the BMJ summarizes their debate:

Surveys show that 90% of the UK population support organ donation, yet only 23% have registered their wish to donate, writes Veronica English, Deputy Head of Medical Ethics at the British Medical Association.

Research indicates that countries with presumed consent have 25-30% higher donation rates than those with informed consent. So by changing the default position to presumed consent we can help save and transform more lives whilst respecting the wishes of those who want to donate and protecting the rights of those who do not, she says.

Spain has a presumed consent system which portrays a positive attitude towards donation, together with major financial investment and good organisation. It also has the highest recorded donor rate in the world, at 35.1 donors per million population, compared with 12.8 in the UK.

“We cannot afford to wait another five years before beginning to consider alternatives because the longer we procrastinate the more lives are lost unnecessarily,” she warns. “Now is the time for a public debate about presumed consent.”

But Linda Wright, a Bioethicist at the University of Toronto, believes that no single strategy is likely to solve the organ shortage.

She points out that donation rates vary even between countries that practice presumed consent and suggests that presumed consent will not work unless it is accompanied by the necessary equipment, trained personnel and intensive care beds.

She also says encouraging people to talk to their families about their wishes on donation, engaging communities to help build the necessary trust to favour organ donation, and increasing our knowledge of what influences donation rates are also important.

Finally, meeting the demand for organs may require not only increasing organ supply but also optimising disease prevention and recipient selection, she adds.

“Given the multifactorial nature of the problem, presumed consent alone will not solve the organ shortage,” she concludes.

With the U.S. pension landscape having deteriorated so much, is it time, as the libertarian paternalists argue, to create presumed consent for 401(k)s throughout the land? (Richard Thaler debates this and related subjects today in a Wall Street Journal blog.)

And, with the transplant recipient list growing longer every year, is it time to do the same for organ donation?


chappy8

Inertia is a powerful force!

I think you mischaracterize a number of your arguments in this post. 1/ In the title- by definition 401ks or other defined contribution-type plans cannot be 'underfunded.' Underfunding generally refers to defined benefit, or 'traditional' pension plans.

2/ I think you should investigate recent pension legislation. The Pension Protection Act of 2006 includes a number of provisions that pave the way for assumed 'opt-in' of automatic contributions (and escalation of such contributions). I suspect a good percentage of employers had already added assumed 'opt in' features to their plans, but law was intended to supercede possible conflicts with wage garnishing law.

frankenduf

one problem with automating 401ks is the potential for corruption in the "allocation decisions"- if these decisions become unduly influenced/biased, the plans may benefit corporations rather than the workers

chappy8

post #2. I'm not sure I understand. Unless the the allocations are in company stock, I'm not sure this is true. (There are already limits on the allowable % of company stock in 401ks). Also, I believe most plans would match a portion of salary, so this only 'protects' workers from leaving money on the table.

I think you mean that the plans might benefit investment-product/plan administrator/asset managers. This influence/bias is already there with or without automatic enrollment or allocation.

topkara

This trade-off between neutral and more intrusive policies reminds me of a usability paper by Russell Beale titled "Slanty Design". Its title comes from a story that the surface of the desks in US Library of Congress were tilted towards the readers as opposed to being conveniently flat. Combined with a glass panel over the wood, this design prevented coffee cups, food or ink pens to be put on top of the papers while reading them. Compared to the conventional alternative, the design becomes less attractive from the patron's point of view, but more suitable for their overall purpose.

The intriguing paper was suggesting that the
overall design process should be focusing on what user should and shouldn't be doing with the end product and in order to achieve this, the initial product designs should be evaluated to find out and eliminate unforeseen side effects.

Dave Undis

Presumed consent would increase the supply of organs in the United States -- if it was legal. But it's not, and there's no chance that it will be legal in the forseeable future. There is a whole lot of opposition to the idea, so from a political standpoint it's a complete non-starter.

Our government caused the organ shortage by making buying and selling organs illegal. Our government has shown no interest in fixing the problem it created. To reduce the organ shortage we need to look at ideas that don't require government action.

LifeSharers is a grass-roots attempt to reduce the organ shortage. It's an organ circle. Members agree to offer their organs first to other members, and they invite everyone to join.

LifeSharers offers a compelling trade -- you agree to donate your organs after you're dead, and in exchange you'll increase your chances of getting a transplant if you ever need one to live. Membership in LifeSharers is free at www.lifesharers.org or by calling 1-888-ORGAN88. There is no age limit, parents can enroll their minor children, and no one is excluded due to any pre-existing medical condition.

Read more...

pkimelma

I am not sure there is much opposition to presumed consent. But, there are some problems: Does this apply to non-citizens? What do you do to ensure people know they can opt-out? (there is no national ID card or other such method). How do you know if they have opted (in or out or neither)? We have enough problem telling if someone has opted in now (sometimes they are registered in some database, sometimes they have a driver's license with this, sometimes a next of kin knows they opt-ed in; most of the time it is unclear and time is often of the essence in organ donation). So, how do you "presume consent" when you cannot figure out if they have opt-ed out vs. opt-in vs. not opted at all (what the presumption part is for). That is, the real issue.

egrrl

The province of Ontario is in the process of making organ donation opt-in. Not sure of the details, but I know they are working on it.

egrrl

Sorry, I meant opt-out, not opt-in. Duh.

skip742

The comparison of the two makes an interesting argument, but I'm not sure the conditions are the same. I think opt-out as a default for kidney transplant sounds somewhat interesting, but I'm not sure I could support it. It suggests that you can use part of my body that I haven't authorized. Seems a bit eery, doesn't it? The libertarian in me worries about the implications of that. On the other hand, much of the same result could be achieved by just simplifying the opt-in process. Personally, I have opted in at least twice, and yet I'm pretty sure I'm now considered a non-donor. There seems to be no registry that would coordinate those decisions aside from state drivers license bureaus, and that decision seems to expire with the license.

With 401-k's, however, the issue is a bit easier to stomach. Even if it's considered a condition of employment, it's not as though we'd be pushing them into something. It's still a choice. Moreover, the opt-out standard is a good bit less intrusive than even that, so I have no ethical problem with it. Would there be some abuse in the early stages? I have no doubt. But it's still probably a net gain for savers.

It does, however, ignore the bigger problem with 401-k's. Those who aren't viscerally committed to saving are not going to have money in their 401-k's at retirement anyway. Why? Because they almost always collect it as a lump-sum when they leave their employer and spend it on a big ticket item in lieu of saving for it. As an investment advisor, I've seen it over and over. It never ceases to amaze me.

Read more...

euroasian

As far as the organ donating and default consent to be an organ donor, I encountered this article several months ago that deals with how the medical community deal in Singapore sometimes acts. I believe you'll find it quite interesting:

http://today.reuters.com/news/articlenews.aspx?type=oddlyEnoughNews&storyID=2007-02-28T222553Z_01_SIN173241_RTRUKOC_0_US-SINGAPORE-ORGANS.xml&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=NewsArt-C1-ArticlePage5

amelie

In France, we have an organ donation opt out system. Still, you find "donation cards" in every "pharmacie" by which you can express your will. Ironically, you can only express your consent on those cards.

It is true that opt out system imply a good communication so that the people who are against it can express their opposition to organ donation. Those people are supposed to register at the "Registre Nationale des Refus" run by the "Agence de la biomédecine". Various associations try to have families talk about this issue (http://www.france-adot.org/ is probably the most active)

I'm an ardent defensor of organ donation (not for personal reasons - i don't know anyone who is waiting for a donation). My husband, on the contrary, is against it for himself. And guess what: he has NOT registered his position, even though i've told him he should. Of course, in case of an accident, even though he has not registered, i suppose i can express his wish not give an organ. Actually, now that i think of it, i don't know anyone who has regristered to tje "Registre national des refus"...

Read more...

chappy8

Inertia is a powerful force!

I think you mischaracterize a number of your arguments in this post. 1/ In the title- by definition 401ks or other defined contribution-type plans cannot be 'underfunded.' Underfunding generally refers to defined benefit, or 'traditional' pension plans.

2/ I think you should investigate recent pension legislation. The Pension Protection Act of 2006 includes a number of provisions that pave the way for assumed 'opt-in' of automatic contributions (and escalation of such contributions). I suspect a good percentage of employers had already added assumed 'opt in' features to their plans, but law was intended to supercede possible conflicts with wage garnishing law.

frankenduf

one problem with automating 401ks is the potential for corruption in the "allocation decisions"- if these decisions become unduly influenced/biased, the plans may benefit corporations rather than the workers

chappy8

post #2. I'm not sure I understand. Unless the the allocations are in company stock, I'm not sure this is true. (There are already limits on the allowable % of company stock in 401ks). Also, I believe most plans would match a portion of salary, so this only 'protects' workers from leaving money on the table.

I think you mean that the plans might benefit investment-product/plan administrator/asset managers. This influence/bias is already there with or without automatic enrollment or allocation.

topkara

This trade-off between neutral and more intrusive policies reminds me of a usability paper by Russell Beale titled "Slanty Design". Its title comes from a story that the surface of the desks in US Library of Congress were tilted towards the readers as opposed to being conveniently flat. Combined with a glass panel over the wood, this design prevented coffee cups, food or ink pens to be put on top of the papers while reading them. Compared to the conventional alternative, the design becomes less attractive from the patron's point of view, but more suitable for their overall purpose.

The intriguing paper was suggesting that the
overall design process should be focusing on what user should and shouldn't be doing with the end product and in order to achieve this, the initial product designs should be evaluated to find out and eliminate unforeseen side effects.

Dave Undis

Presumed consent would increase the supply of organs in the United States -- if it was legal. But it's not, and there's no chance that it will be legal in the forseeable future. There is a whole lot of opposition to the idea, so from a political standpoint it's a complete non-starter.

Our government caused the organ shortage by making buying and selling organs illegal. Our government has shown no interest in fixing the problem it created. To reduce the organ shortage we need to look at ideas that don't require government action.

LifeSharers is a grass-roots attempt to reduce the organ shortage. It's an organ circle. Members agree to offer their organs first to other members, and they invite everyone to join.

LifeSharers offers a compelling trade -- you agree to donate your organs after you're dead, and in exchange you'll increase your chances of getting a transplant if you ever need one to live. Membership in LifeSharers is free at www.lifesharers.org or by calling 1-888-ORGAN88. There is no age limit, parents can enroll their minor children, and no one is excluded due to any pre-existing medical condition.

Read more...

pkimelma

I am not sure there is much opposition to presumed consent. But, there are some problems: Does this apply to non-citizens? What do you do to ensure people know they can opt-out? (there is no national ID card or other such method). How do you know if they have opted (in or out or neither)? We have enough problem telling if someone has opted in now (sometimes they are registered in some database, sometimes they have a driver's license with this, sometimes a next of kin knows they opt-ed in; most of the time it is unclear and time is often of the essence in organ donation). So, how do you "presume consent" when you cannot figure out if they have opt-ed out vs. opt-in vs. not opted at all (what the presumption part is for). That is, the real issue.

egrrl

The province of Ontario is in the process of making organ donation opt-in. Not sure of the details, but I know they are working on it.

egrrl

Sorry, I meant opt-out, not opt-in. Duh.

skip742

The comparison of the two makes an interesting argument, but I'm not sure the conditions are the same. I think opt-out as a default for kidney transplant sounds somewhat interesting, but I'm not sure I could support it. It suggests that you can use part of my body that I haven't authorized. Seems a bit eery, doesn't it? The libertarian in me worries about the implications of that. On the other hand, much of the same result could be achieved by just simplifying the opt-in process. Personally, I have opted in at least twice, and yet I'm pretty sure I'm now considered a non-donor. There seems to be no registry that would coordinate those decisions aside from state drivers license bureaus, and that decision seems to expire with the license.

With 401-k's, however, the issue is a bit easier to stomach. Even if it's considered a condition of employment, it's not as though we'd be pushing them into something. It's still a choice. Moreover, the opt-out standard is a good bit less intrusive than even that, so I have no ethical problem with it. Would there be some abuse in the early stages? I have no doubt. But it's still probably a net gain for savers.

It does, however, ignore the bigger problem with 401-k's. Those who aren't viscerally committed to saving are not going to have money in their 401-k's at retirement anyway. Why? Because they almost always collect it as a lump-sum when they leave their employer and spend it on a big ticket item in lieu of saving for it. As an investment advisor, I've seen it over and over. It never ceases to amaze me.

Read more...