I've heard that Obama was reluctant to push harder for a public option because the health bureaucracy is such a massive employer. If true then we're basically dragging along a counter-productive boat anchor that eats a ton of our health care spending as a back-door jobs program.
They dropped it to woo one moderate Democratic senator (Lieberman), who was basically the Manchin of his day. Without his vote, it would've gotten filibustered to death.