Optional Public Option might be path to a viable compromise on Health Care Reform

Optional Public Option

The “Public Option” is the most contentious single item in the entire health-care reform debate. The debates touch not only the implications and effects of the public option, but on the very definition of what it is. A possible compromise on this most contentious item in the heath-care reform debate might be creating an “optional public option”. What is this is “double option”?
In short, the federal government would create and fund the infrastructure for a public insurance plan similar to Medicare, or allow the public to directly buy-in to Medicare for some X-amount in premium cost. However - and this is key to the compromise - states would get to decide if they wanted to opt-in (or Opt-out) of the public option program. In short, states would get an option to allow their residents the option to buy into this medicare like program.
To be clear, this will not be a “state based” program or co-op. This will be a federal program which will involve the federal government setting reimbursement policy and prices (either through negotiation or agreed to set rates such as medicare +5% ) with the health care provider community. States will get the option of “plugging in” to the system.
While purists on either side will not be completely satisfied with this approach, there are still plenty of advantages that both sides can cheer.
States with a significant fear of a "federal takeover of the health care system can opt-out.
At the same time, the Program will benefit from the economies of scale and (possible) negotiating power the a large buying entity like the federal government will have. Additionally, States may be able to customize the implementation of the program to meet specific state needs.

Perhaps most importantly, this partial roll-out of the program to only certain states will provide a great source of data and comparison to see what a public option looks like, and what the effects of it are. For those on both sides of the public option debate, the partial roll-out will provide an opportunity to say “prove it”. Will private insurance be driven out of business followed by rationed public care? Ok, prove it! Will insurance cost drop while care quality increase? Ok, prove it! With so many unknowns and unanswered questions regarding the public option, a partial rollout to states who choose the public option (or choose not to) will enable many of these questions to be answered, or to “Prove It”. Furthermore, as states may differ in implementation, this will also allow everyone to see how the public option works in various different states.
Specific details around the structure, especially with regards to the federal funding, will need to be worked out. In (accounting and microeconomics) theory, the federal government would fund all “fixed costs” and the states and individuals would fund all variable costs. Obviously, where one draws the line between “fixed” and “variable” costs would be tricky, but still easier than getting agreement among the current set of proposals.

In short, the Optional Public Option is both pro-market and federalism at its best, combining the potential benefits of centralized efficiency with decentralized diversity.