There is a lot of talk right now about the so called "public option" that the President wants in the health care reform bill. The administration claims that this will not supplant private health insurance, but simply provide an alternative for those who cannot afford private coverage. Let's test this with a thought experiment.
Let's say that there is an industry that manufactures widgets. The companies that make the widgets get the components (gizmos) from a group of suppliers scattered all over the country. Since gizmos are very difficult to make, the suppliers have to spend years learning how to manufacture them, and the gizmos are correspondingly fairly expensive, which in turn makes the widgets made from the gizmos expensive.
Enter the government, who decides that widgets are vitally important to America, and that everyone needs them. Since not everyone can afford them, or in some cases simply don't want them because of the expense, they are going to build widgets too, and provide them for a lower price to the people who can't afford the free market widgets.
Sounds OK so far, right? But wait, there's a catch. Because, you see, the government can make laws, and one of the laws they have made is that they only have to pay 30% of the actual cost of a gizmo when they buy one. So what happens? Since the gizmo makers have to sell to the government (another law), and they can't make enough money to cover their own costs on government sales, they pass the cost on to their private customers, driving up the cost of private widgets. Meanwhile, the government is selling their widgets for 50% of what the private manufacturers can (since the government doesn't have to make a profit).
What happens? Well, a whole bunch of people decide to buy their widgets from the government, even if they could afford the private ones - why pay 50% more? Widget manufacturers start to go out of business, and their customers end up buying government widgets. Its a domino effect - in a relatively short time, there are no private widget manufacturers anymore (have we mentioned the rise in unemployment because of this?). Now, because they can't charge extra for private gizmos, the gizmo makers start to fail. Soon, there is a shortage of gizmos, and the government has to create a waiting list for widgets, based on their criteria of who needs, or can benefit, the most from a widget.
Substitute doctors for gizmo makers, insurance companies for widget makers, and you start to see the problem. We already see part of this with Medicare - because Medicare pays only pennies on the dollar for procedures, doctors have to pass on the cost of those patients to those with private insurance, which raises premiums for the everyone else.
A public option, open to those making up to 500% of the poverty level, would accelerate this trend like an ICBM strapped to a Vespa - its OK for the first few milliseconds, but by the time the brain realizes the enormity of this mistake, its already too late to stop.