Ideas and Amusements is an experiment.

"Why markets can't cure healthcare" by Paul Krugman

In short:

1. Prices are either unpredictably cheap or expensive, which means insurance is the only realistic way for most people to pay for it.
2. Insurance is incentivized to deny people care, which they do by refusing claims and not enrolling those with pre-existing conditions.
3. But when insurance tries to cut costs responsibly - by discouraging ineffective treatments and so forth - they don’t have the trust from the public to do just that since we know about their incentive structure and regard every cost-cutting measure as morally cruel.

#1 means insurance is necessary, which walks us into the chicken-and-egg bind presented by #2 and #3. When it comes to cost-cutting in the current system, those covered by insurance perceive themselves to be bearing all the risk with promise of little reward in reduced premiums.

A public option would break this stalemate by combining the incentive and the costs into the same pool; any money saved in health-care would be returned to those the insurance covers, rather than a third-party stockholder. Additionally, by cutting costs it would provide precedent that private insurers could point to when instituting similar prudent cost-cutting measures within their own systems.