Democrats are too good at one thing: Compromise. The other side never worries about that. They count their votes, twist some arms, and force through the Leader's position.
To get the public to accept extreme views, the Rethugs have mastered moving the Overton window. That is, they take an idea that is outrageous and talk about it as if it were sensible, so that the range of acceptable public discourse moves a notch in their direction. Their extreme view doesn't get accepted right away, of course; it just means that a somewhat less extreme view, which used to be seen as a fringe idea, now suddenly looks moderate by contrast.
Democrats get it wrong. We start in the middle, hoping that we can make everybody happy. This works when both sides play the same game, but it fails miserably when the other side is pulling from the extremes. So maybe it's time to try their rules. Move the window back our way. Don't start from the final compromise.
The "public option" for health inurance is a very moderate compromise. It is not an extreme position at all. It's as centrist as one can get. On the right, there's the status quo, and on the extreme right, there are some positions that McCain and others have expounded, taxing health insurance and trying to move people to medical savings accounts (i.e., self-insurance) with very limited insurance backup for catastrophic care.
So let's look to the left. Two notches to the left is single payer. Doctors remain private. Hospitals remain private. Only insurance becomes public, with a national insurance plan setting allowable reimbursement rates and rules, and collecting from everyone.
One wee-tiny notch to the left is a German-style plan. Even insurance companies remain private in such plans. But the risk is nationalized. Insurance companies are servicing organizations. When they serve a high-cost patient, the national pool, a big reinsurance pool if you will, covers it. So there's zero incentive to "underwrite" away sick people; in fact they prefer them, since they get more work from them.
Yet we can't even get the US to look that far. So let's go three notches to the left, to that apparent bastion of hard-core Marxism, the United Kingdom. There, the National Health Service not only provides everyone with insurance coverage, but it owns the hospitals and pays the doctors. So health care is one big state function, sort of like public (in the US meaning) schools, police, and roads. That puts the insurance companies out of business... although there is still a small UK market for private insurance that offers access to private clinics, etc., where the wealthy can get care without dealing with the other 90%+ or so. Of course those plans are backstopped by the NHS, since private insurance there does not exempt you from paying taxes that feed the NHS.
So here's the spectrum so far:
a NHS
b Single-payer
c Multi-payer, single risk pool
d Multi-payer, public option
e Multi-payer, no public option (status quo)
f Multi-payer, tax incentives to limit coverage
The current Overton window in Congress seems to be d-f, with d perceived as hard-leftist and f perceived as the Opposition's wish. So we end up stuck at e, the status quo, with trivial bandages put on a few of its most glaring problems, but probably made worse in other areas. For example, what we've found here in Massachusetts is that mandatory coverage does not lower cost (by widening the pool); it RAISES insurance prices (up 28% this year alone!) by forcing people to pay into an unregulated oligopoly.
If we started talking about an NHS-style plan as a reasonable goal, with single-payer as a very moderate compromise, perhaps we could get a public option taken more seriously.