I agree with literally everything yeastfan21 said. If you're looking for a basic, unbiased view of the public option and all it entails, read his post above. Seriously, do it.
I have a few comments, but quickly, I want to give a definitive layout of single payer vs. socialized medicine vs. the public option.
Single Payer - As mentioned above, this simply refers to any system in which all citizens are REQUIRED to have a single type of insurers administered by the government, and thus, all health care providers bill a single, central insurer. Canada is single payer. Doctors and hospitals in Canada are private. They have no government bureaucracy directing their medical decisions, they just bill to one place. Granted, this lowers salaries because there is no competition for doctors' rates. Doctors don't have to accept Medicare (that's the name of Canada's single payer system), but if they don't, they are usually forced to practice totally concierge medicine.
Medicare in the US is also single payer. All citizens over 65 are required to have it (although you can buy private supplemental insurance through Medicare Advantage). Rates are set by the government, and premiums are subsidized by the government...thus, a small monthly premium (compared to private insurance) is paid based on a sliding scale of income/means. If you have $200,000 to spend a year, you'll pay the full (albeit small) premium. If you have $2000 to spend a year, you'll pay nothing for Medicare.
Socialized Medicine - All doctors and health care workers are employees of the government. They are generally paid a yearly, but incentivized, salary. The UK's National Health Service is a great example here (even in the UK though, you can buy private insurance if you can afford it and would rather not use the NHS). Doctors in socialized medicine are definitely paid less, but their medical education is typically almost free, because they will work for the government upon graduation. There's a bit of leeway here. Like I said, there are private hospitals, doctors, and insurers even in the UK. So if you go that route, it's a bit different.
Now for the public option:
The public option is neither socialized medicine nor single payer. It is simply one plan, among many, which some parts of the population will be able to choose to enroll in. It is not government subsidized, minus a repayable start-up cost, and exists solely on premiums from its customers. There will be a government administration (to lower costs), but no government bureaucrat has any say on medical policy. Just like with private insurers, those decisions (what to cover, when to cover it, etc.) are made by the public option's medical board. The government administrator simply ensures the smooth operation of the plan (just like a private CEO).
Remember that the public option as it now stands is NOT government-funded. It will be paid for by monthly premiums paid by its customers. In fact, the latest CBO estimate actually has it saving well in excess of $50 billion. Of course, this estimate is highly specific to the "type" of public option that ultimately comes out of Congress.
A "weak" public option which negotiates rates with doctors the same way as private insurers saves about $50 billion over 10 years.
A "strong" or "robust" public option which reimburses doctors at Medicare rates + 5% will save closer to $150 billion over 10 years.
Because the plan is not government-subsidized, most of its cost savings are in reduced overhead (2-3% like Medicare vs. 20-30% for private companies) and reimbursement rates. A strong public option saves more money quite frankly BECAUSE it pays doctors less.
Remember that only a small subset of the population will even be able to use this plan. As yeastfan21 mentioned, it appears that it will be limited to middle-to-low income Americans who cannot get insurance from their job. From an economic standpoint, there's a danger that since relatively few people will actually have the plan and since it will pay less anyway, many doctors may choose NOT to accept it. This might pigeonhole public option patients to a few doctors, much like the problems today with Medicaid.
Now, the public option is still AN OPTION. So, if this situation develops, nothing prohibits people from canceling or not renewing their policies (or simply not choosing it in the first place).
There really are three basic ways to look at this scenario.
1) The public option is an ideological tragedy. Because it will not drive any insurers out of business, the only legitimate beef with the public option is that the government should not administer a health care plan. This is basically the same opposition seen from 1960-2000 with Medicare.
2) The public option is useful to drive down costs for people who currently lack insurance and the means to buy it. Like yeastfan21 said, the greatest concern is that we require everyone to have insurance and don't offer people the means to afford it. The public option competes with private insurers directly via an Exchange. If you've ever been to progressive.com, that's what an Exchange is. Unemployed individuals and employers would be able to go on the Exchange and see all of the plans available in their area. They can compare premiums, deductibles, coverage areas, etc. all side-by-side. Even without a public option, this will have a small effect on increasing competition. But for low-to-middle income individuals, the public option will be included in this exchange...further driving down cost (increasing affordability).
3) The public option is too limited in scope to be of much help. For low-to-middle income Americans, the public option is important because it actually will lower costs. However, for the remainder of the country, we won't have access to the public option. Much of the reason for this decision is a desire to keep private insurers in business. Indeed, this policy PREVENTS the much-aligned development of a single payer system in this country. The public option as it stands now will NEVER become the only surviving insurance plan...simply because it will NOT be available to everyone. If you make $250,000 per year and don't get insurance through your job, you CAN'T choose the public option.
Incidentally, though, this point is where the plan can be attacked from the ideological left. Sen. Ron Wyden will debut an interesting amendment once the Senate bill comes to the floor; it will call for an expansion of the public option AND Exchanges to ALL Americans. In terms of economics, this makes perfect sense. It will encourage competition everywhere and at all price points. And yes, the public option (if still Medicare + 5%) would probably come to dominate the market. Some people believe this would be a good thing.
Sen. Rockefeller wants a simple expansion of Medicare to all. That would be a single payer system in line with what Canada has. Even so, it wouldn't outlaw private insurers. Just like Medicare only covers a certain proportion of costs, so too would Medicare-for-all. Just like Medicare, consumers would be free to use Medicare Advantage to buy supplemental and partially subsidized plans from private insurers. Still, this is neither here nor there because at this time, such a plan is politically infeasible.
And finally, if you've made it to the end of this post, let me leave you with a quote:
Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States where men were free.
-Ronald Reagan, 1961
Eloquent to say the least, was he talking about the Cold War? Nope, that quote was in reference to the establishment of Medicare in the US.
Don't be swayed by partisan drivel. Medicare has the highest-rated customer satisfaction of any insurance plan in the US, and it has by far the lowest overhead. The public option won't be quite the same, but I guarantee it won't be as bad as Ronald Reagan circa 1961 would have you think.
Thanks for reading (or skimming).
