New Jersey, for example, requires insurers to cover a wide range of procedures and types of care, including in-vitro fertilization, contraceptives, chiropodists and coverage of children until they reach age 25. Those mandated benefits aren't cheap. According to a 2007 analysis by the National Center for Policy Analysis, the cost of a standard health insurance policy for a healthy 25-year-old man averaged $5,580 in the state. A standard policy in Kentucky, which has far fewer mandates, would cost the same man only $960 a year.

Unfortunately, consumers are more or less held prisoner by their state's regulatory regime. It is illegal for that hypothetical New Jersey resident to buy the cheaper health insurance in Kentucky. On the other hand, if consumers were free to purchase insurance in other states, they could in effect "purchase" the regulations of that other state. A consumer in New Jersey could avoid the state's regulatory costs and choose, say, Kentucky, if that state's regulations aligned more closely with his or her preferences.

With millions of American consumers balancing costs and risks, states would be forced to evaluate whether their regulations offered true value or simply reflected the influence of special interests. Rep. John Shadegg, R-Ariz., has a bill in Congress that would allow consumers to purchase their insurance in other states.

We also need to rethink medical licensing laws to encourage greater competition among providers. Nurse practitioners, physician assistants, midwives and other non-physician practitioners should have far greater ability to treat patients. We also should be encouraging such innovations in delivery as medical clinics in retail outlets.

The choice facing us now is not between Obama's plan for health care micromanaged by the government or doing nothing. Rather, it is a choice between government control, regulation and rationing on one hand, and free markets, choice and competition on the other.

That is the real health-care debate.

Michael Tanner is a senior fellow at the Cato Institute and co-author of "Healthy Competition: What's Holding Back Health Care and How to Free It."