Oh, I completely agree we can do better, and that civilized debate is unfortunately nowhere to be found. A large part of that is defining the problem in a reasonable fashion, and being honest about solutions.
We don't have a free market. We haven't since congress established our employer based health insurance system. We have a highly regulated industry where laws create essentially only 2-3 providers in each state. These providers sell primarily to businesses because of various tax laws. So most consumers of healthcare never see the real bill, and have no incentive to shop around or minimize the cost of procedures. When getting an x-ray or an MRI have the same deductible, which are you going to choose? People make decisions that they would not if they were paying the bills themselves, driving up the overall cost of insurance.
Adding to this, because most insurance is obtained with employment, increasing required benefits is seen as benefitting workers and normal people. This means in many states, insurance is required to pay for birth control, medications, and other procedures - this makes it more expensive (generally to the employer, so the cost is again hidden), but it also drives up costs for individuals who don't have employer-funded insurance. Most healthy young adults (the largest group who lacks insurance) can't buy a high-deductible, low-benefit plan that would only pay for catastrophic damage (similar to the minimum coverage car insurance many of them are also buying) because state law prevents it.
Finally, because voters are concerned about insurance companies bypassing the laws they have made about minimum insurance (which, again, make some sense when you see insurance as part of a benefits package from employers, not as something bought by the individual) they don't want insurance companies to be able to cross state lines. This preserves state's individual mandates for extended coverage, but reduces competition and overall increases prices.
The proposed solution for a public "option" attempts to solve the problem of availability and price for those without employer insurance without solving any of the other major issues contributing to the rising costs of medical care. Ignoring any argument about the proper role of government, there is a very hard problem here of how to run a government backed system that is simultaneously more efficient than private efforts (who have a very good reason to be efficient, as they lose money if they aren't) while not undercutting private industry to the point of driving it out of business. It is very hard for a private industry to compete with a government corporation who can mandate that people buy its product, or what prices its clients can charge. Two very likely (or at least very concerning) outcomes of this are that the public option fails to be more effective and becomes a bloated, inefficient arm of government that requires ever higher taxes and fees to administer, or that it succeeds and in doing so drives private industry out of business. Any government-backed company is not playing on a level field with its opposition. It is either operating under legislative mandates which hamstring it as a successful business, or with a government windfall that removes impetus for better management and hides the real costs of poor decisions.
Given all that, we have three groups of people who need to be served by healthcare:
Those who have or can pay for "normal" insurance.
Those who can't pay for normal insurance.
Those who have an existing issue that prevents them from getting normal insurance.
The first group aren't really the problem at all - they pay for a good that they can afford, get some use out of, and are generally happy with. Few people are arguing that US healthcare is actively (or at least significantly) worse for those who do have insurance.
The second people can be fixed at least partially by lowering the cost of insurance, but many of them will still never carry it. Short of actively charging or imprisoning people not looking after their own health (which sounds like a really bad idea, from a civil liberties standpoint) there doesn't seem to be much one can do aside from everyone having basic emergency coverage from the government. For the most part, these people can end up handled by medicaid.
Finally, we have the people for whom the insurance model completely fails. They are going to consume more medical resources than they will pay for to be able to continue living comfortably. My question is - why are we still looking at this part of the problem as an insurance problem? At this point, they are a charity problem. They haven't bought into their whatever % of their chance to get something bad to make the insurance gamble work. It becomes a straight question of how much money is a person "entitled" to to allow them to live. When you consider that someone with a bad disease, or in a coma, can easily run up medical bills in the hundreds of thousands of dollars. When they themselves can't pay for it, we have to consider what makes them entitled to that much money, and as with all charity, weigh the good of helping them over what else could be done with those resources. People hate to talk about rationing healthcare, but we ration every single other essential item that is provided as societal charity. Why should someone with cancer be given enough resources to survive when those same resources could have saved twenty people who were injured in car crashes and uninsured.
Studies have shown that humans are emotionally irrational when it comes to healthcare. They will pay thousands to remain on life support for an extra day but never go to the gym or pay to live somewhere cleaner, activities that will (on average) extend their lives by years. I argue that governments cannot afford to be, or at least, that if we should acknowledge it and place limits on it. If we decide that everyone dying of cancer is entitled to charity money to save them, how much are they entitled to, and why should that same program cover normal single-case emergencies that they *should* have been able to have insurance for ahead of time, or have taken out loans to pay. That's part of the argument I want to see - "healthcare" is too broad a topic for the simplified debate we end up with.