Looks like we're getting a lot closer to getting a Health Care Reform bill out of the Senate. Liberal and conservative Democrats have found a compromise they can live with, and I think overall it's not a bad one. From what I understand, people who did not receive health insurance from their employer and have to shop for it on the insurance exchange would have the choice of a public option unless the state they reside in chooses to opt out of it. This allows us to use the "states as laboratories" method to test the effectiveness of a public option. There are enough big liberal states (like California and New York) that will likely include it, so it has a chance of having a real effect on costs overall, and may cow insurance companies into behaving less disgustingly. At the same time, the "keep the government out of my Medicare!" crowd can make a point by voting it down in their respective states. If Ben Nelson and Olympia Snowe sign onto this than it's pretty much a done-deal and there will be enough votes to break a filibuster and send a bill to the conference committee to be reconciled with the House bill. Then the real work begins...
EDIT: To be clear, this would be a federally administered public option that the states could opt out of if they so choose, not a public option administered by individual states. That idea would be a non-starter because without the heft of the federal government, a public option would not be big enough to have the desired effect of reducing health care costs by negotiating Medicare-plus-whatever rates.
EDIT 2x: Good analysis here and here. Naturally there are lots of details to be worked out.
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