Deregulation and regulatory backlash in health care

The American health care system is undergoing a market and organizational t ransformation analogous to the deregulation of the transportation, communic ation, utility, and finance industries, with price competition replacing ra te controls, new entrants displacing organizational incumbents, innovation disrupting stability, and individual choice supplanting governmental oversi ght. These turbulent changes are generating uncertainty, hostility, and a b acklash towards re-regulation. This article compares the evolution of the h ealth care sector with the experiences of other deregulated industries, hig hlighting four effects that cut across all sectors. Deregulation and the ri se of price competition has led everywhere to: lower costs, due to better c apacity utilization and improved productivity; increased differentiation of prices and products, moving away from the one-size-fits-all patterns chara cteristic of regulated industries; dynamic changes in both market and organ izational structures, culminating in consolidation into multi-product, geog raphically diversified firms; and political backlash, fueled by uncertainty , organized producer groups, and selected groups of consumers who do not be nefit from the overall cost and product improvements.