Cleared Hot: Episode 391 – Chris Hamilton

Release Date: June 16, 2025

In Episode 391 of Cleared Hot, host Andy Stumpf engages in an insightful discussion with Chris Hamilton, a finance professional with 15 years of experience who has delved deep into the complexities of the U.S. healthcare and insurance systems. Their conversation unpacks the intricate mechanisms behind health insurance, the role of big pharma, pharmacy benefit managers (PBMs), and the pervasive issue of vertical integration within the industry. The episode serves as a comprehensive exploration of why healthcare costs continue to rise and offers potential pathways to mitigate these escalating expenses.

1. Understanding the U.S. Healthcare and Insurance Ecosystem

Andy Stumpf opens the discussion by differentiating between healthcare and health insurance, emphasizing that they are two distinct systems often incorrectly perceived as one. He traces the origins of employer-based health insurance back to the 1940s, highlighting how historical tax benefits incentivized employers to offer health insurance as a form of compensation.

Andy Stumpf [09:05]: "We have a predominantly employer-based health insurance system in the United States. Most people have a job and they get their health insurance from their employer. In fact, about 54% of Americans that are insured get their health insurance from their employer."

Chris Hamilton concurs, acknowledging the complexity and historical roots that have shaped the current landscape.

2. The Role of Big Pharma and Pharmacy Benefit Managers (PBMs)

The conversation shifts to the influence of big pharmaceutical companies and PBMs. Stumpf explains how PBMs act as intermediaries between drug manufacturers and insurance companies, setting prices and negotiating rebates.

Andy Stumpf [20:04]: "A pharmacy benefit manager is an entity that sets the price for medications that the insurance company is going to pay separate from the pharmacy itself."

Hamilton points out the opacity in this system, where rebates and pricing strategies are often hidden from consumers, leading to significantly inflated drug prices.

Chris Hamilton [22:11]: "Only 18% of their top line...85% is coming from pharmacy benefit management."

3. Vertical Integration and Its Consequences

Andy elaborates on the trend of vertical integration, where large insurance companies acquire PBMs, healthcare providers, and other related entities to control the entire healthcare delivery process. This consolidation reduces competition and increases the ability of these conglomerates to influence pricing.

Andy Stumpf [37:34]: "The 15% profit margin only applies to the insurance company. The rest of this is unlimited profit potential... the three biggest PBMs which are owned by CVS, Cigna, and United Health, that's 80% of the market."

Hamilton reinforces the concern about monopolistic practices, highlighting how these integrations prioritize profit over patient care.

Chris Hamilton [37:40]: "If you break down all of their earnings, the majority of the income is coming from other than insurance. It doesn't make total sense."

4. Affordable Care Act (ACA) and Its Impact

The ACA aimed to increase insurance coverage but inadvertently accelerated the consolidation of insurance companies. Stumpf discusses how this legislation led to fewer, larger insurance providers dominating the market, further entrenching the issues of high premiums and limited consumer choice.

Andy Stumpf [09:35]: "Medicare and Medicaid are the other two big."

Andy Stumpf [10:36]: "The insurance companies have vertically integrated... They've now gotten into the healthcare ecosystem."

5. Misaligned Incentives and Rising Costs

A significant portion of the dialogue focuses on how the profit-driven nature of insurance companies and healthcare providers leads to rising costs. Stumpf highlights the inefficiency where higher premiums do not correlate with higher quality care.

Andy Stumpf [06:46]: "You would think that as the cost increases, the quality should as well, which actually isn't even necessarily true in the car world, but that's the story that we tell ourselves."

Hamilton underscores the lack of transparency, where consumers are often unaware of the true cost structures, leading to financial strain despite having insurance.

Chris Hamilton [25:06]: "So you have to show how much you're going to make...making record profits."

6. Pricing Transparency Issues

The lack of transparency in healthcare pricing is a recurring theme. Stumpf shares personal experiences illustrating how difficult it is for consumers to understand and predict healthcare costs, contrasting it with the straightforward pricing in industries like coffee shops.

Andy Stumpf [05:20]: "What other part of our life did we walk in somewhere and we're gonna buy something and we don't know what it's gonna cost?"

7. Legislative Actions and Potential Solutions

Despite the challenges, there are legislative efforts aimed at curbing exorbitant drug prices. Stumpf discusses a recent executive order initiated by former President Trump, which mandates drug manufacturers to match prices found in other countries.

Andy Stumpf [42:50]: "The goal of this executive order is to say if he can get it in a tier one country... that's the price that we're going to be paying here in the United States."

However, both hosts express skepticism about the effectiveness of such measures, citing potential legal challenges and the need for comprehensive legislative reform.

8. Alternative Approaches by Employers

A pivotal part of the discussion revolves around how certain employers are innovating to combat rising healthcare costs. Stumpf shares case studies of employers who bypass traditional insurance models by negotiating directly with healthcare providers, thereby securing lower costs and better benefits for their employees.

Andy Stumpf [80:13]: "We're helping employers build those plans with the right partners. So we don't use any of those big PBMs that I discussed because they're not transparent."

Hamilton emphasizes that empowering employers with knowledge and alternative strategies can lead to significant savings and improved healthcare outcomes.

9. The Human Impact and Economic Implications

The episode poignantly highlights the personal toll of the broken healthcare system. Stumpf recounts his brother’s ordeal with costly medical bills despite having insurance, illustrating how current practices fail to protect individuals from financial ruin due to medical expenses.

Andy Stumpf [86:31]: "One of the biggest benefits about being medically retired from the military is the TRICARE benefits. For me, that's the largest single benefit."

10. Future Outlook and Conclusion

Looking ahead, both hosts are cautiously optimistic. Stumpf believes that as more employers recognize and address the inefficiencies in the current system, there will be a gradual shift toward more sustainable and transparent healthcare models.

Andy Stumpf [91:30]: "There’s always something that you can do."

Hamilton echoes the sentiment, envisioning a future where misaligned incentives are realigned to prioritize patient care over profits.

Chris Hamilton [95:21]: "Well, if nothing changed, in 10 years, the costs would spiral out of control, leading to widespread financial instability for both providers and patients."

Key Takeaways

• Vertical Integration: The consolidation of insurance companies, PBMs, and healthcare providers restricts competition and drives up costs.

• Transparency: A lack of pricing transparency leads to unexpected and unaffordable medical bills, even for insured individuals.

• Legislative Efforts: While there are attempts to regulate drug prices, comprehensive solutions are still needed to address systemic issues.

• Employer Innovations: Alternative insurance models negotiated directly with providers can offer significant cost savings and better benefits.

• Personal Impact: The broken system can lead to severe financial hardships, highlighting the urgent need for reform.

Notable Quotes

• Andy Stumpf [09:05]: "We have a predominantly employer-based health insurance system in the United States...about 54% of Americans that are insured get their health insurance from their employer."

• Andy Stumpf [20:04]: "A pharmacy benefit manager is an entity that sets the price for medications that the insurance company is going to pay separate from the pharmacy itself."

• Andy Stumpf [37:34]: "The 15% profit margin only applies to the insurance company. The rest of this is unlimited profit potential..."

• Andy Stumpf [05:20]: "What other part of our life did we walk in somewhere and we're gonna buy something and we don't know what it's gonna cost?"

• Chris Hamilton [95:21]: "Well, if nothing changed, in 10 years, the costs would spiral out of control, leading to widespread financial instability for both providers and patients."

This episode of Cleared Hot provides a critical examination of the U.S. healthcare and insurance systems, shedding light on the hidden factors contributing to rising costs and offering pathways for both employers and individuals to navigate and potentially reform these complex structures. For those seeking a deeper understanding of healthcare economics and actionable solutions, Episode 391 is an invaluable resource.