The "public option" is the idea that the federal government would run its own insurance program that people can buy into instead of buying into private insurance. Such a plan would have cheaper premiums because it would be subsidized by the federal government and would supposedly enjoy economies of scale. Those in favor say that the plan will force private insurers to compete more effectively.
One of the critics' arguments--that such a plan would drive private insurers out of the market--is plausible. The government, they say, would have an unfair advantage vis-a-vis private insurers, which would not be able to compete. One by-product of driving out private insurers, they say, would make health care as a whole inefficient and deny choice to those seeking health care.
Their argument is plausible. The critics' anticipated outcome--driving private insurers from the market--is presumably also anticipated by some of the plan's supporters. And its not clear, as Vincent Carroll of the Denver Post has pointed out in this column, that private insurers are not already having a hard time making ends meet.
The critics' argument makes sense, in broad brushstrokes. But I'm not so sure that a public option would be the death knell its critics say it would. Perhaps it would create niche-markets for some private insurers, or as my plan would (in theory) do, it might make the market for preventive care more competitive.
I say all this without having looked closely enough at the issue to make a prediction. I just urge caution before assuming that we know what would happen.