This Case Study Should be Required Reading in Every Health Econ Course

Image caption: Robert “Skeeter” Salim in his office in Natchitoches, Louisiana. After Salim was diagnosed with stage four throat cancer, his health insurance, Blue Cross and Blue Shield of Louisiana, refused to pay for proton therapy, recommended by Salim’s doctor. Salim, named one of the country’s top litigators, fought back. Credit:Danielle Villasana for ProPublica

Man is diagnosed with throat cancer. Doctors at MD Anderson want to treat it with proton therapy at a cost of $96,862.95. The health insurer objects, saying that treatment should begin with less expensive radiation therapy. The doctors say that radiation therapy has a risk of damaging other organs.

In this case, the patient is a trial attorney with means. He pays the hospital for the proton therapy with his own funds and then sues the insurer.

The insurer succeeds in moving the case to federal court as an ERISA dispute. Under ERISA, the plaintiff can‘t get punitive damages. If you win, you can only get actual damages plus attorneys’ fees. Also under ERISA, the insurer is free to exercise reasonable discretion in deciding what procedures to approve and claims to pay. To overcome this burden, the plaintiff must show “abuse of discretion.”

These are reasons why ERISA claims are rarely pursued in federal courts. In this case, the patient seemed to be motivated by the principle of the matter rather than an expectation of large financial gain.

The medical literature the insurer had been ignoring seemed to favor the patient, and he won the case. He expected to be repaid for a medical bill that approached $100,000. Instead, the insurer paid him only $35,170.47 – claiming that was the negotiated rate between the insurer and the hospital, and it is the amount the insurer would have paid if it had approved the procedure in the first place.

If you understand all this, you might look forward to a successful career in health economics.