Krugman nails it on MSNBC:

Of course, this does not prevent the White House from capitulating on the public option, because, as I’ve said before, Barack Obama does not care about healthcare reform, he cares about being able to sign some sort of healthcare reform bill, even if it is bad and has no real reform, because he gets to claim success.

They are talking Co-Ops, which we know won’t work, because they haven’t worked. If they were even marginally successful, we would see hundreds of them, some of them huge, and we don’t….They can be counted on the fingers.