Rajaratnam's kidney transplant could cost taxpayers $300,000

@CNNMoney October 21, 2011: 5:12 PM ET
Raj Rajaratnam was convicted of insider trading, and now taxpayers could have to pay for his kidney transplant.

Former hedge fund manager Raj Rajaratnam was convicted of insider trading and is headed for prison. Taxpayers will probably have to pay for his kidney transplant.

NEW YORK (CNNMoney) -- Taxpayers could be bankrolling a kidney transplant for wealthy white-collar convict Raj Rajaratnam, who was recently sentenced to 11 years in federal prison for insider trading.

The cost could exceed $300,000 if he's able to secure a kidney early in his sentence, including the price of the transplant and a decade's worth of post-operative therapy.

At Rajaratnam's sentencing on Oct. 13 in New York, federal Judge Richard Holwell described the former hedge fund manager as a diabetic with "imminent kidney failure" who needs a transplant.

The judge also said he will ask the Federal Bureau of Prisons to place Rajaratnam in the Butner Federal Correctional Complex in North Carolina, which has a medical facility. Incidentally, Butner is home to Ponzi schemer Bernard Madoff, who is serving a 150-year sentence.

All federal prisons have some level of medical care, according to Federal Bureau of Prisons spokesman Edmond Ross, but some prisons specialize in it. Butner is one of six federal prisons that are considered medical centers, meaning that their mission is to deliver more enhanced medical care than what would normally be expected from a prison hospital.

Rajaratnam will probably get sent to Federal Medical Center Devens in Massachusetts, not Butner, because Devens specializes in kidney treatment, including dialysis, according to Ross.

Rajaratnam lawyer requests Madoff prison

Rajaratnam's lawyer Terence Lynam, who requested Butner, declined to comment.

But none of the hospitals in the prison system conduct transplants, said Ross. That work would be outsourced to a non-prison hospital.

A kidney transplant can cost up to $130,000, including preparation for the procedure, according to Dr. Stephen Textor, a nephrologist at the Mayo Clinic Transplant Center in Rochester, Minn.

And that's not all. Following the transplant, anti-rejection therapy costs up to $20,000 per year, he added.

That would fall on the taxpayers. Not that the former hedge fund manager and Galleon Group founder has a choice. Rajaratnam does not have the option of paying for his own treatment once his sentence begins on Nov. 28.

"No, he cannot pay for it himself," said Alan Ellis, an attorney, prison consultant and author of the Federal Prison Guidebook. "No way. There's no such thing as rich man's medicine versus poor man's medicine in the Bureau of Prisons."

As part of his sentence, Rajaratnam was fined $10 million, but this money will not be used to cover the cost of his confinement, nor his healthcare bill.

Ross would not say how much the bureau specifically spends on health care, but the U.S. Government Accountability Office estimates that the cost is growing, in tandem with the aging prison population.

"I don't know what the 2012 health care costs are going to be, but it wouldn't surprise me if it's approaching a billion dollars," said David Maurer, director of the Homeland Security and Justice Team of the GAO, which analyzes the federal prison budget.

Larry Levine, an ex-convict and founder of Wall Street Prison Consultants, which advises soon-to-be-prisoners on how to survive behind bars, has first-hand experience with correctional health care.

Rajaratnam gets record 11 years for insider trading

Levine did time at eight federal prisons and three county jails from 1998 to 2007 for his involvement in organized crime. He said that in 2003, while doing time at the Lompoc Federal Correctional Complex in California, a routine check-up detected a heart murmur.

He was sent to a non-prison hospital for further tests, and a doctor decided to immediately implant stents in his arteries. The procedure cost him nothing; instead, Lompoc had to pick up the tab.

"I get back to the prison and the prison is pissed off that I went and had these done because it cost them more money," said Levine. "They said, 'You weren't supposed to go and get stents put in.'"

Levine said that his cellmate had a much more expensive procedure -- open heart surgery -- that he didn't have to pay for.

While Levine has mixed feelings about the quality of in-prison care, he said that prisoners are subject to regular physicals and blood tests. That's how they determined that he had heart trouble -- something he might not have detected outside of prison.

"I tell people that I had better medical care in prison," he said. "Going to prison probably did save my life."

But in the case of a transplant, paying for it isn't even half the battle. Dr. Textor said that 17,000 to 18,000 kidney transplants are conducted in the U.S. every year, but there are 80,000 patients on the waiting list at any given time.

Many of the kidneys come from organ donors who have agreed to give them up once they die. These organs are generally provided on a first-come, first serve basis, said Dr. Textor, though children and living donors who have already provided kidneys are given priority on the list.

Who are the 1%?

Having said that, prisoners in need of transplants are not held back by their dubious legal status, based on the Constitution's eighth amendment forbidding "cruel and unusual punishment."

Les Funtleyder, a health care industry analyst with Miller Tabak, said that organ donors who agree to surrender their vital parts after they die are not permitted to earmark their organs for preferred recipients, such as sick children or injured firefighters, nor are they permitted to blacklist others, such as prisoners.

"There's nothing that you can check off that says 'felons no, misdemeanors OK,'" said Funtleyder, author of Healthcare Investing: Profiting from the New World of Pharma, Biotech, and Health Care Services.

Rich people are not allowed to jump the line, nor are they allowed to buy kidneys in the United States, because that would encourage exploitation of the poor and desperate, said Dr. Textor.

But being in prison does block Rajaratnam from one of his best options, however unethical it may be: buying a kidney overseas.

"In the real world, if he were not a prisoner, he might travel to China or Thailand or some other location, and be able to purchase a kidney," said Dr. Textor. "But it's actually black market and the World Health Organization discourages it." To top of page

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