Finding ways to deliver high-quality health care to an increasingly diverse population is a major challenge for the American health care system. The persistence of racial and ethnic disparities in health care access, quality, and outcomes has prompted considerable interest in increasing the cultural competence of health care, both as an end in its own right and as a potential means to reduce disparities. This article reviews the potential role of cultural competence in reducing racial and ethnic health disparities, the strength of health care organizations' current incentives to adopt cultural competence techniques, and the limitations inherent in these incentives that will need to be overcome if cultural competence techniques are to become widely adopted.