“[The public option] forgoes at least 84 percent of the administrative savings available through single payer. The public plan option would do nothing to streamline the administrative tasks (and costs) of hospitals, physicians offices, and nursing homes, which would still contend with multiple payers, and hence still need the complex cost tracking and billing apparatus that drives administrative costs. These unnecessary provider administrative costs account for the vast majority of bureaucratic waste. Hence, even if 95 percent of Americans who are currently privately insured were to join the public plan (and it had overhead costs at current Medicare levels), the savings on insurance overhead would amount to only 16 percent of the roughly $400 billion annually achievable through single payer — not enough to make reform affordable.”
Source: http://www.pnhp.org/news/2009/march/himmelstein_and_wool.php Public plan option in a market of private plans by Dr. David Himmelstein, M.D. and Dr. Steffie Woolhandler, M.D., M.P.H.