the 'public option' would be one of the choices in the 'insurance exchange' obama talks about, but it IS a federal program like medicare. i just googled 'what is a public option'(no quote marks) and got this article from the american prospect to help explain it-
http://www.prospect.org/cs/articles?article=the_public_option_and_the_hope_of_health_care_reformThe Public Option and the Hope of Health Care Reform
The inclusion of a much-maligned policy option in Democrats' discussion of health care reform points to just how much the debate over health care reform has moved forward
Since the remarkable results of Nov. 4, there has been much discussion about the new progressive moment in which America finds itself. But it has actually been evident for some time that we're talking about old issues in new ways. Let's take just one -- health care reform-- which could actually happen next year. One thing we know is that there will be a serious, even vicious fight over the issue. What we don't know is whether President-elect Obama will seize the moment, or succumb to the same fear that has stayed Democrats' hands for so long.
In the presidential primaries, all three top Democratic candidates -- Obama, Hillary Clinton, and John Edwards -- featured in their health care plans something that would have been unimaginable just a few years ago, a public option.
The public option is a government health insurance program akin to Medicare, which would be open to anyone. Credit should go to Edwards, who not only was the first of the three to propose it, but who said that if so many people chose the public option that over time it evolved into a single-payer system, that would be fine with him. That kind of talk used to come only from candidates with no chance of winning.
Although the public option wasn't the topic of a great deal of discussion during the campaign, for many progressives it amounts to a beautiful jewel hidden amidst a pile of compromise and disappointment. Ask average progressives what they think ought to be done about health care, and many will reply, "Well, a single-payer system would obviously be the best thing. But since that's politically impossible…" At the end of 2008, some things seem a little more possible than they used to.
That isn't to say a public option is just a modified single-payer system. It would be one option among many for individuals and businesses, and would leave the private insurance system in place (you can read more on the benefits of the public option here). But it does crack the door open for expanding the number of Americans who get their health insurance through the government. And this is what terrifies the insurance companies and conservatives. Their fear is that it will actually work. If the program operates well, more and more people will make the rational decision to choose it over private insurance (what we're supposed to do in a market, after all) and the insurance companies will lose customers.