Box 4.1 The Government Role in Ensuring Clean Blood

The HIV/AIDS epidemic has dramatically increased the importance of clean blood. Where the most serious common infection that a transfusion recipient previously had to fear from unscreened blood was hepatitis B, which is rarely fatal and communicated in only about 2.5 percent of unscreened transfusions, recipients in some countries now face a one-fourth chance of HIV infection (Emmanuel, WHO, as cited in Fransen, personal communication). As a result of the HIV/AIDS epidemic, the transfusion required for a surgical procedure or childbirth that might have been relatively routine in a developing country ten years ago now requires the guarantee of clean blood to be equally safe.

What should be the government’s role in the provision of safe blood? Setting aside poverty, which is addressed in the text, five justifications can be identified for the public to subsidize or otherwise play a role in the provision of blood: (1) to prevent HIV infections in blood recipients; (2) to prevent infections in the sexual partners of blood recipients; (3) to avoid the sudden onset within a community of the health risk from unscreened blood; (4) to provide the economies of scale that apply to a blood bank service; and (5) to avoid the difficulty that a citizen would have in judging the quality of a blood bank.

While a high-quality blood bank will obviously be quite effective in preventing the transfusion of infected blood, and thereby in preventing the hospital from infecting transfusion recipients, this fact does not, by itself, imply that the government should play a role in supplying the clean blood. Setting aside for the moment considerations (2) through (5), the provision of clean blood is comparable in importance to the provision of clean needles, clean bandages, and clean hands of the nurses who change those bandages. Any arguments for government financing of decent quality of care, including basic cleanliness in the hospital, also apply to clean blood. If one accepts the argument that hospital care is a basic need, which should be heavily subsidized by the government, then the same argument would apply to clean blood. If, however, one believes that there is no obvious reason to favor curative health care over other necessities, such as clothes, housing, and clean water, then clean blood should receive as little subsidy from the government as other curative health care services.

Yet even those who believe that most curative care deserves little subsidy admit that the treatment of infectious diseases confers positive externalities and thus should be subsidized. This brings us to an evaluation of the second consideration. Assuming that transfusion recipients recover from the medical procedure and then become sexually active, preventing their infection may prevent them from infecting others. How large are these positive externalities? For one country, Uganda, box 4.2 shows that a highly effective program prevented 517 secondary infections in 1994 at a cost of $1,684 each. While this cost is much less than the lifetime treatment cost of an HIV-infected person in an industrial country, it is more than any reasonable estimate of the cost of preventing secondary infections in Uganda. Thus, the prevention of secondary infections does not appear to be sufficient to justify government subsidy of the entire cost of the program, although it could justify a partial subsidy.

Considerations (3) and (4) appeal to the same economic arguments often used to justify government infrastructure investments. The sudden increase in risk from blood transfusion is a shock to the health care system, too rapid for individuals and private institutions to make new blood-screening arrangements quickly. As the insurer of last resort against catastrophic changes in the environment, the government has a role in assisting society in adjusting to the new higher cost and complexity of health care in the presence of AIDS. Furthermore, as demonstrated by box figure 4.1, a blood transfusion service entails substantial economies of scale. Since a single transfusion service can serve all local needs without exhausting its economies of scale, it would be a natural monopoly without the fear of competition to ensure quality service at the best price. It would be forced to charge prices above marginal cost in order to cover its costs and might charge prices well above average costs in order to maximize its profits. Just as for electric utilities and other natural monopolies, there is a well-established justification for government intervention to regulate, if not own and operate, them in such circumstances. However, they do not justify a 100 percent subsidy for blood.

Consideration (5) involves the inability of the public to judge the quality of a blood bank. This argument is not particular to blood transfusion services, since patients have an equally difficult time judging the quality of their physicians.1 Yet patients can choose among many different physicians, but, because of the economies of scale, are unlikely to have a choice of blood banks. The government and the public should not assume that any monopoly, whether it produces electricity or blood bank services, and whether it is "for-profit" or "nonprofit," will indefinitely perform in the public’s best interest. In this situation there is an argument for the establishment of a regulatory board to whom the blood transfusion service is responsible.2 The board should consist of representatives of the medical establishment, government, and patients and should produce an annual report on the quality of the blood bank service, which should then be widely disseminated in the press.

In sum, the appropriate role of government in financing blood supplies depends first on one’s view of the degree of financing the government should provide to curative health services. The argument for curative services extends directly to the provision of blood. The number of secondary infections averted through blood screening is unlikely to be a powerful argument for government subsidies. Even so, there is a strong argument for the government to launch and nurture a blood bank service as a subsidized "infant industry," before subjecting it to the rigors of the financing arrangements provided for the rest of the health care system. Finally, because economies of scale will tend to make the blood bank a monopoly in most communities, blood bank services should be subject to strict regulatory review.