I INTRODUCTION Although they appeared to slow the rate of health care cost increases in the 1990s, (1) the health plans that emerged in the marketplace in the managed care era generally disappointed early supporters of the health care revolution. (2) Most of those reformers envisioned a future in which health maintenance organizations (HMOs) and other hoped-for organizational innovations would prove to be effective and desirable vehicles for generally improving the quality of care and rationalizing health care spending. A few theorists, however, took a somewhat broader view, and hoped to see the entire health care system transformed into a relatively unfettered competitive market in which spending would reflect primarily the preferences of consumers, not the system's own imperatives. (3) Reformers of the latter, more market-oriented kind were doomed to face greater disappointment as the health care industry evolved. This article seeks to explain the failure of the health care revolution to achieve its most ambitious goals , especially the more radical one of installing a truly democratic regime based on competition and real consumer choice. (4) Early reformers advocating principally organizational reform envisioned health plans that would closely integrate the financing and delivery of care and organize providers into discrete prepaid groups, each striving to compete not just on price but, more importantly, by improving efficiency and the quality of care. (5) Their hopes for such integration were based in part on observing a few highly successful early models of prepaid health care, particularly the Kaiser Foundation Health Plan, Inc. (6) Unfortunately, modern health plans do not replicate those early, highly integrated models. Even the Kaiser system, while it continued to perform very well relative to other arrangements in the managed care era, encountered difficulty in creating fully integrated organizations in new areas. Likewise, few new health plans, whether start-ups, evolving group medical practices, or innovating health insurers, succeeded in integrating financing, physicians, and capital resources to the same extent that Kaiser did at an ea rly date. Indeed, Kaiser remains virtually unique, in its few core markets, as a stable and effective partnership combining a nonprofit health plan, a nonprofit hospital system, and a fully integrated multi-specialty medical group dedicated solely to caring, for a single plan's enrollees. (7) Market theorists, who hoped to see health care viewed and treated more like a consumer good, have had even more reason to be discouraged by the outcome of the health care revolution. Among other things, the market reform strategy contemplated that consumers, if offered opportunities to choose effective health plan agents for purchasing services and organizing care, would, for the first time, be given choices with different price tags reflecting different trade-offs between quality and cost. (8) Like the organizational reformers, market reformers envisioned the domestication of providers in integrated organizations. However, they also hoped that competition would cause health plans to cater to differing consumer preferences, seeking in particular to give good value for whatever various subsets of consumers might choose to spend on health coverage. Obviously, the market reformers' vision has also not been realized--even though the health care industry has been functioning under an ostensibly competitive regime for many years and has featured numerous firms offering competing versions of managed health care. This article begins by noting in Part II the gains made during the revolutionary years of health care reform. The next three Parts then consider seriatim why the health care system failed to reach three specific objectives envisioned by reformers: (1) organizational integration of the delivery of health care with its financing; (2) market responsiveness to a full range of consumer preferences; and (3) the creation of middlemen whom consumers could trust as their agents for administering coverage and protecting premium pools against moral hazard. …