All government regulations face a persistent problem. By their very nature they are trying to keep people from acting in their own self-interest. Either they try to keep people from doing what they want to do, or force them to do something they don’t want to do. In a complex system populated by people who are highly entrepreneurial, it won’t be long before you get unanticipated private sector activity that partially undermines the original goal of the regulation. As time passes there will predictably be even more undermining. If the regulation never changes, eventually the private sector may innovate around it completely…. There is one thing that makes health care different from a garden-variety regulated industry: The main actors in the system (patients, providers and insurers) all face perverse incentives. So, a lot of entrepreneurial activity ends up making costs higher and quality lower for the system as a whole…. No one in the system, including the regulators themselves, has a self-interest in making sure the system works the way almost everyone thinks it should work.

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