Public option?

I’ve yet to have anyone explain to me how a public option for health insurance could lead to real competition among private insurance companies.

Wouldn’t the public option have the backing of virtually limitless federal funds, allowing it to undercut anything the private sector might offer? And if the public option begins to lose money, the way Medicare does now, wouldn’t that end up costing taxpayers a lot more than they are paying today?

I’ve heard arguments that this is like public radio and television. After all, PBS isn’t running private television networks out of business. But that comparison fails on many levels. Americans don’t need to watch television or listen to the radio. Public broadcasting relies on private donations and institutional ads, which is a different model than other networks.

Perhaps most importantly, the government doesn’t require everyone to watch a network the way it wants to require people to have health insurance. You can, and quite often do, watch several television stations in a single evening.

I think this is more like the owner of a toy store who suddenly finds that a taxpayer-supported planetarium and museum has opened a toy store down the way. (That was an actual case I reported on nine years ago.) The private toy store owner simply can’t compete.

So, can someone explain the connection between a public option and true market forces?