Games with adaptive difficulty are out there, however they have a mixed history, e.g. players work out how it works and exploit it for profit, e.g. deliberately fail hard at one section before a difficult boss, so that the game eases up.
Another issue is that the game active penalizes you for doing too well, by making things extra-hard, which can be unfair for people who played cautiously. e.g. say a game gets harder if you avoid taking damage or if you have lots of ammo, then you're actively rewarded for playing recklessly and penalized for doing things like conserving ammo. In those cases, a hidden mechanism where the game shifts the difficulty can throw off the decision making process where players do trade-off such as whether to use a melee weapon and take some hits, or use up your big gun ammo and avoid damage. Decision-making in a game shouldn't involve hidden variables there that can trip the player up, because a well-designed game should let you be fairly clear about what you're picking between. e.g. if you decide to avoid the damage and use ammo in a fight, then if the difficulty-adjust only responds to damage taken, then it's always better to take the damage and save the ammo for later, even if you have too much ammo. So it throws off the player's decision about conserving "ammo vs health", since there are hidden variables costing more if you pick the "wrong" one.
e.g. say the difficulty-adjust calculates how much total damage you've taken throughout the game, and if it's low, then it makes the enemies shoot more accurately, shoot more often, have better reactions, or be more numerous. Then, players who avoided damage at the start, even though they couldn't pick up the health packs, are penalized later on. The problem here is that such a player was taking a stealth/cautious approach to the game, and then because of that the "difficulty adjust" decided to royally fuck them over by making things really hard, which basically make the stealthy/cautious style less fun. And for the "guns blazing" play-style, where the player takes a lot of damage and uses up a lot of healthpacks, then the game decides that the later enemies nee to be more milquetoast, to ease up on the amount of damage that they can deal to the player. Also, for this player, the change isn't necessarily fun either.
Also, the "difficulty adjust" of this type in a shooter basically guarantees that if you start out with one play-style, it's harder or less fun to switch it up. e.g. if you start with stealthy, then the game ramps up the enemy strength, which ensures that if you get to a part of the game where you need "guns blazing" to get through, you can't do it, since the enemies have been made OP to account for you taking so little damage up to that point, and if you have been playing "guns blazing" and taking a lot of damage, it ensure that there's never a section where you're blocked and have to think about trying out the stealthy approach, or if you do so, it's too easy then, since the enemies have been nerfed to account for how much damage they've dealt out up to then.
Another example is say you save-scummed a lot in the early levels to conserve health and ammo, then the game makes itself "extra hard" to compensate for how "well" you are playing. Then, that play style too is penalized, since the game decides to make you its biyatch for the rest of the play time, forcing you to save-scum even more.
"Reactive difficulty" is basically a bad idea that just sounds good on paper. What's actually much better is to give the player different routes, weapons, tools, options and let them sort it out. Players who want extra difficulty can just try and beat your level with the pistol.