The Role and Variety of Intermediaries in Healthcare

Intermediaries in healthcare initially function by pooling risk, a fundamental aspect of their existence. However, once they hold this risk, they develop incentives to influence the care their members receive. Having collected premiums, they are financially responsible for members' care costs, leading them to manage these costs responsibly to retain customers and improve their business performance. This cost management can be implemented in various ways by different intermediaries.

Different intermediaries adopt diverse strategies for managing care. Some invest heavily in what is known as 'managed care,' while others do less so. This variation gives rise to numerous terms and models such as HMOs, PPOs, and high-deductible health plans, all representing different methods intermediaries employ to manage the healthcare of their members effectively.

No country utilizes a single national intermediary for all its citizens; instead, various combinations of intermediaries exist, adding complexity to healthcare systems. These combinations arise for different reasons, such as serving specific demographics (e.g., Medicare in the US for those over 65), catering to particular geographic areas, or offering multiple choices to individuals.

Globally, intermediary structures vary significantly. In the UK, the National Health Service (NHS) acts as a large public intermediary funded by taxes, providing universal coverage. However, individuals also have the option to purchase private insurance. In contrast, in the US, most people under 65 obtain insurance from a multitude of private companies, from which they choose their preferred provider.