Back in December, I criticized the false dichotomy set up by those who claim that the only available alternative to the Obama health care plan is some form of socialized medicine.

In this recent essay, University of Chicago economist John Cochrane gives an excellent summary of free market alternatives to the ACA that can cut health care costs and deal with the problem of preexisting conditions, which is the main justification for the ACA’s individual mandate.

Here’s one of his key points:

We all agree what we’d like to see: Health care needs to become efficient, innovative, and provide high quality care at lowest possible cost....

How will this happen? Well, we have before us many good examples. Walmart and Home Depot revolutionized retail. Airlines are dramatically cheaper than in the 1970s. Consumer electronics, telecommunications, computers, and even cars are much better and cheaper, for what you get, than ten or twenty years ago.

These revolutions are not just about technology. In most of these cases, we see process innovation, reorganizing activities to deliver complex services at lower cost and with better and more uniform quality. This process efficiency is most glaringly absent in health care...

How will this change come about? My examples share a common thread: Intense competition by new entrants, who put old companies out of business or force unwelcome and disruptive changes. Microsoft displaced IBM, and Google is displacing Microsoft. Walmart displaced Sears, and Amazon.com may displace Wal‐Mart. Typewriter companies didn’t invent the world processor, nor did they adapt. The post office didn’t invent FedEx or email. Kodak is out of business. Toyota gave us cheaper and better cars, not Ford/GM/Chrysler competition. When the older businesses survive, it is only the pressure from new entrants that forces them to adapt....

A small example: In Illinois as in 35 other states, every new hospital, or even major purchase, requires a “certificate of need.” This certificate is issued by our “hospital equalization board,” appointed by the governor (insert joke here) and regularly in the newspapers for various scandals. The board has an explicit mandate to defend the profitability of existing hospitals. It holds hearings at which they can complain that a new entrant would hurt their bottom line. Specialized practices that deliver single kinds of service or targeted groups of customers cheaply face additional hurdles, as they undermine the cross‐subsidization provided by “full service” hospitals....

Continue reading: http://www.volokh.com/2012/11/02/free-market-alternatives-to-the-aca/