With Obamacare failing nationally, some states are looking to create publicly funded health care systems within their borders.

The idea is that a public option at the state level will spur competition and bring down rates of insurers who participate in the Obamacare exchanges.  But some experts are doubtful, citing evidence that a public option at the state level will reduce payments to doctors and hospitals without expanding consumer choices for coverage.

Washington Examiner:

Minnesota, Maine and Rhode Island lawmakers have debated setting up a state-funded health plan, which would be available to shoppers in Obamacare's online marketplaces alongside private plans. And Colorado residents soon will vote on whether to create a taxpayer-funded health program dubbed "ColoradoCare," which would cost $38 billion a year but guarantee coverage for everyone.

The Affordable Care Act doesn't provide a government-run health plan, an idea Congress rejected when it passed the law in 2010, but it does provide a way for states to offer their own.

The idea is contentious, even at state and local levels. By offering cheaper rates, public-option plans can put pressure on private plans to reduce prices as well, helping consumers buy health coverage that is typically expensive.

But opponents say government-run health plans ultimately hurt the healthcare industry by destroying competition among plans and slashing reimbursements to doctors and hospitals.

Yet there may soon be some room for lawmakers to work together, as states grow increasingly concerned about rising rates and decreasing competition in the Obamacare marketplaces where their low-income residents are buying coverage.

About 100,000 Minnesota residents are losing their Blue Cross plans next year, as the insurer withdraws some individual market plan offerings. Some rural counties in the state might be left with options from just two carriers.

The state already sells a state-run, basic health plan, called MinnesotaCare, but it's only available to low-income residents and isn't sold in the state's marketplace, MNsure. Democrats have been pushing to expand the plan to everyone regardless of income level and offer it through MNsure.

In the spring, a state Senate committee passed legislation from Democratic Rep. Kathy Sheran expanding MinnesotaCare to those with incomes above 200 percent of the federal poverty level and allowing them to put their Obamacare subsidies toward the plan. Her bill is supported by the Minnesota Nursing Association but opposed by the Minnesota Hospital Association.

"What [the Affordable Care Act] did, I believe, is it exposed something," Sheran told the Mankato Free Press at the time. "People started to see the differences in the geographic regions about how much a health insurance product costs.

If states wish to go this route, they must get permission from the federal government in the form of a waiver where they have to prove that their state-level program would not damage competition.  This would be a challenge for any state.  But with Obamacare sinking, the government may have no choice but to grant the waiver anyway.

State-level public options are a bad idea, as the Massachusetts program "Romneycare" showed.  The only way to control costs is to shift the burden from consumers to doctors and hospitals.  This would force providers to limit the number of patients they serve, further stressing the system and even leading to a state-level meltdown.

The states may be the "laboratories of democracy" but they shouldn't be playing mad scientist when it comes to our health care.