There are some tremendous diaries about the opt-out public option here : Slinkerwink, thereisnospoon, and Volsky at wonkroom all contribute greatly to the conversation.
But I want to add a perspective - that the state based opt out idea follows American historical precedent on major national issues states, and it fails in the same way other compromises that way have failed.
This "compromise" harkens back to an earlier one. The great Missouri Compromise of 1820 resolved that states would be admitted to the Union in pairs, one slave and one free, to basically avoid confronting an increasingly desperate problem of human bondage in the United States.
Like the opt-out compromise, it sought to keep the status quo as much as possible, keeping the balance of power as it was in the hopes of avoiding a clash that all feared would result in armed conflict.
Over the years, Missouri and Arkansas were admitted as slave states, while Maine, Michigan and California were admitted as free states. The admittance of California prompted the Second Missouri Compromise of 1850 where Texas gave up western territory for $10 million, California entered the Union as a free state, and the Fugitive slave law was passed - one of the most onerous and controversial laws in American history.
Eventually, the Supreme Court struck down the Compromise in 1857 and ruled that the US government could not be viewed as citizens in the infamous Dred Scott case. This, with the Kansas Nebraska Act of 1854, basically left it up to each state to determine if they were to embrace slavery or reject it. The fallout from this resulted in Bleeding Kansas, and with the Fugitive Slave Law set the nation on an irrevocable path to war.
The enactment of Public Health care will not result in a civil war. But it does force us to confront major question of the day, which is the economic importance and moral humanity of a nation taking care of its sick and dying in an intelligent, viable, and humane way.
Shall we let each state decide to how it will take care of its own health care? Shall we feel it right and proper to allow such disparities in the well being and livelihood of our fellow citizens, because their state is poor, or because the state government holds to ideology over pragmatism and foresight? Shall we create another Fugitive law, where those in need of health care are refused help in one state and returned to economic bondage in another simply because of where they live?
There are those that say the federal government is too powerful, that the rights of states are being eroded, and that individual freedoms are being ground down. In a number of policy and constitutional areas I would agree with them with enthusiasm. But when it comes to public welfare, whether it be bondage, body economic, or health, I say if the states refuse to serve their citizens then it is right and duty of the Federal government to enter the fray. When those who oppose a policy refuse to argue the facts yet continually embrace provable falsehood, distortion, and, yes, aggression, I say they forfeit their chair at the table of rational policy discussion.
There is no doubt that a national public option that includes a good many states will be stronger than other public options that Volsky mentioned in the Wonk room. To allow states to do so individually would greatly lessen the impact of reform and in effect be coops in a new guise, and not real reform at all. The later is of course preferable. In both cases though, people will still be made to buy insurance. In both cases, we abandon our fellow citizens to the predations, indeed increased predations by mandates, of this market based health care system that we are all too familiar with.
The public option is indeed an option, and those who do not wish to join will not be made to do so. But let that be an individual choice, not one made by State Governments who like any other government have long lists of failure and corruption in their own histories.
To adopt a state-based opt-out public option is to ask us to compromise the duty of nation. It asks us to split our country by health, both personal and economic. It asks us to refuse to help our fellow citizens in need, simply because they do not live in the same place. It makes them economic fugitives in their own nation, and is as morally corrupt as any other compromise that divided the nation of the past.
NOTE:
Edited to correct spelling errors both egregious (I thought "biothg" was a word fer shure) and minor.
Also, while I note that a national plan with opt out is better than state level, it does still leave those in need worse off esp. if the mandate is not tied to the opt out. However many more will be come bankrupt or die in an opt out compromise than if the public option was mandatory, even if eventually all states adopt it. It may be politically expedient, but the morals of it are weak at best.