LAURENCE O'DONNELL: But we begin with the raging debate over health care that is taking place across the country. Joining me now is Congresswoman Niki Tsongas, a Democrat of Massachusetts, and Congressman Brian Bilbray, a Republican from California.

Niki Tsongas, you heard Chuck Grassley, who has been negotiating with Democrats in the Senate, not refute, when given the chance, this notion of death panels that is not in any bill anywhere. Let's listen to what he actually said about it yesterday.

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GRASSLEY: (INAUDIBLE) well-meaning people in Congress or people in Washington, but there's some people that think it's a terrible problem that Grandma's laying in the hospital bed with tubes in her. In the House bill, there's counseling for end of life, and from that standpoint, you have every right to fear. You shouldn't have counseling at the end of life. You ought to have counseling 20 years before you're going to die. We should not have a government program that determines you're going to pull the plug on Grandma.

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O'DONNELL: Niki Tsongas, do the American people have every right to fear that the government might pull the plug on Grandma?

REP. NIKI TSONGAS (D), MASSACHUSETTS: Well, I'm actually surprised at Senator Grassley because this notion and this version of what's in the House bill has been absolutely debunked. It's true there is a provision in there that says that if physicians have a conversation with their patient, that they have a right-around these issues, all of which are very, very important, that they have a right to be reimbursed for their time spent at this. It doesn't require that conversation. It can be initiated by a patient as they learn of great challenges of their own health care.

But this interpretation that Senator Grassley has given it is one that, as I said, has been absolutely debunked. And I think in order for us to have the kind of discussion we really do need to have, we have to moderate the tone of it and not use our differences to again do nothing.

O'DONNELL: Congressman Bilbray, has any member of your staff rushed into your office pointing to a section of any one of these bills as written to say, Hey, look, hey look, the government's going to kill Grandma?

REP. BRIAN BILBRAY ®, CALIFORNIA: No, they haven't. In fact, what they've pointed out is that this-this kind of fear is why we don't-we shouldn't be trying to at least give the appearance that we're rushing to judgment and trying to force something. I think once we start setting arbitrary deadlines and saying we don't have time to talk about this, it sets off that paranoia, that concern that government is somehow doing something that they don't want us to know about.

And I think that end-of-life consultation is something we need to talk about as a society, as a community. And I think the biggest concern is that people are saying, Is there something in this bill that I'm not allowed or shouldn't be reading? And that sets off this concern. So I think this is a good reason why we should be slowing down, having a dialogue, talking about this and not fearing these town hall meetings.

I'm a former mayor when I was in my 20s. And frankly, this is a great dialogue we're having back and forth. Both sides are very spirited. They're very concerned. And rightfully so, they want a chance to be able to dialogue about this. So I think if we want to stop these scare tactics, as we talk about them, then let's slow down and stop pushing an agenda that moves so quickly that people think the worst, rather than looking for the best.

O'DONNELL: All right. Let's listen to what I actually think is the most important thing that Chuck Grassley said at that town hall meeting yesterday that everybody has missed. Tactically, this is the most important thing. He said to this crowd that he wanted credit for slowing down the health reform process.

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GRASSLEY: Well, I think that I have-by sticking my finger in the dike, I've had an opportunity to give the grass roots of America an opportunity to speak up, as you're seeing every day on television, and I think that that's a good thing.

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O'DONNELL: Niki Tsongas, President Obama mentions Chuck Grassley constantly as one of the responsible Republicans in the Senate who's trying to work on a solution. Chuck Grassley, when given a chance to describe to his constituents what he's doing, he says he's sticking his finger in the dike. That must have been pretty disappointing for you Democrats in the House, who have been waiting for the Senate to move, and waiting for the Senate Finance Committee in particular, which has missed all the deadlines that Chairman Max Baucus set for it in getting this legislation done.

TSONGAS: Well, I'd like to go back to the notion that we're going too slow. You know, in addition to doing the two town halls that I've done as a part of this August district work period-which have been so helpful to me and I think important to my constituents-I also have done four telephone town halls, which allows me to use technology to reach across the district.

And in one of them, I had an 85-year-old gentleman from Lawrence, Massachusetts, an old industrial city, that said-and he campaigned-he's now 85. He campaigned for President Truman on the issue of health insurance. This is an issue that we have been dealing with as a country for almost 60 years, and in this past presidential election, our two major candidates agreed that we needed to do something.

And so we do have that moment. We've had 60 hearings in the House of Representatives. Three committees have reported out their piece. And this is a moment in time that we have to take advantage of because of the cost of doing nothing is simply too great. We all know the escalating costs of health insurance premiums. They're rising three times faster than wages. We know-we hear the data that if we don't do anything within 10 years, we could be spending $1 out of $5 generated in this country on health care.

We know that-we hear the figure that each one of us is paying over $1,000 a year to help cover the cost of those who are uninsured. And we now-we finally have a moment in time where we had a president elected and committed to making a difference, working with the House, working with the Senate, and committed to going forward.

So you know, I think it's a specious argument to suggest that we haven't been working on this for many, many years. But do I think we have an obligation this month of August and throughout this discussion to get out there, use all forms of communication to reach out, answer people's questions, tweak the bill as we hear concerns that we need to address, but in a sense, debunk all the myths? Yes, I absolutely do. So I think it's been a very important month.

But again, I think that we cannot use these differences to go back to doing nothing. We simply cannot sustain the path we're on.

O'DONNELL: Congressman Bilbray, as we all know who've worked in the Congress, the minority party in the House is always powerless. There's nothing you could have done, for example, in the House to stick your finger in the dike and prevent those committees from taking action. But what you do need on the Republican side, if the Republicans are going to kill this, is someone in the Senate who has the power to stick his finger in the dike, as Senator Grassley has said now that's what he's been doing.

Now, is that really what's going on here? Is this delay-is the Grassley-imposed delay in the Senate about killing the bill or about getting a bill?

BILBRAY: Lawrence, no, it's about, Let's take a look at this. I mean, when people talk about, We don't have time to talk about it, we don't have time for people to read about this-and if it's such a crisis, why is the implementation date at 2013? And 2013 is not tomorrow. So they slow down.

And it's legitimate for people to have a question, Lawrence, about the fact that-if you ask somebody, Would you like to have a free house, a lot of people would say yes. But would you-if they-if you asked them, Would you like to have public housing, it's a totally different answer.

O'DONNELL: OK, Congressman Bilbray...

BILBRAY: So I think it's legitimate...

O'DONNELL: ... what would you be prepared-what would you be prepared to vote for? What could Chuck Grassley negotiate for you in the Senate Finance Committee that you would be prepared to vote for in health care reform?

BILBRAY: First of all, give individuals the same tax credit that we give big business, big labor and big government, the same tax benefits. That should be out there right away, to allow people to independently do that. Portability is a major issue that we talk about. The pre-existing condition I think is something we can actually do. But let's remember, too, we need to look at tort reform. Let's get the lawyers out of the operating room. You know, I was...

O'DONNELL: Would you be prepared to vote for a bill that extends health care insurance and subsidizes it for people who currently cannot afford it?

BILBRAY: Only if they participate in a different type of program than what we see in a lot of places. I think what's exciting is that you look at Niki's state-here's a state that's very aggressive. Here is a state that can actually go-dive into it, and they got major problems...

O'DONNELL: So are you in favor of the Massachusetts plan? It was a Republican plan.

BILBRAY: I think I'm in favor of Massachusetts-I'm very in favor of states being aggressive about this because they're small enough to be able to address if they make a mistake. You got to understand, Niki's state is smaller than one of our counties. We got a county that 50 percent bigger just in California. Niki's state is manageable. It's six million people. It's not 300 million people, which would be the largest health care system in the world by a magnitude of five to six times.

I think Niki's state has taken a great experiment and it's a great way that we ought to look at how can we work with them and see what works or doesn't work because they've got a size that we can manage. We don't have to wait 60 years to admit we made a mistake.

TSONGAS: Can I...

O'DONNELL: Niki, you can tell...

TSONGAS: Can I address that?

O'DONNELL: You can tell Speaker Pelosi that Brian Bilbray is now in favor of insurance reforms and an individual mandate, as has occurred in Massachusetts. What does the experience...

TSONGAS: Well, Massachusetts reform has been an important one.

O'DONNELL: Niki, what does the experience in Massachusetts tell us, especially the struggle they've been having financing that plan?

TSONGAS: Well, I think you have a number of things the Massachusetts plan has done. One, it shows that you can actually have a partnership between the private sector and the public sector. So what you've done is strengthened private insurance companies and strengthened employer-based insurance.

At the same time, you recognize that there are people who cannot afford insurance, whether their income levels are too low or whether they're a small business that cannot compete and negotiate with insurance companies and have the same efficiencies and have the same negotiating power that a larger company does.

So by creating an exchange, you create access for the many who are uninsured and you make a commitment to helping them pay, but on the other hand, they also have to pay a portion of their insurance. And you also create a place that small businesses and the self-employed can go to find affordable insurance.

And the benefit to all of us is that it brings down the cost of care across the system. Also lost in this discussion is the really important insurance reform debates that we-that are so significant to every American, whether it's saying an insurance company can no longer exclude you from coverage for...

O'DONNELL: Well, we just got a Democrat and Republican agreement on this show about the insurance reforms. Brian Bilbray is ready to go with that.

TSONGAS: We did. And there's some others. You know, you cannot have a lifetime cap on people's-what an insurance company is willing to pay out. You cannot drop someone when they become too expensive. You cannot do rating. Your insurance premiums cannot be based on gender. So I would hope that my colleague from California could agree on those, as well, because...

O'DONNELL: Brian Bilbray, you can agree on those insurance reforms, can't you?

BILBRAY: Lawrence-Lawrence, I can agree on a lot of things, as long as we understand that when we put mandates on the insurance options-instead of going to the credit union option that I think that we ought to be looking at, let's not just look at the government option. Let's not look at big business. Let's allow independent people to make independent decisions. And let's not have a situation where we ignore not only the quality, but the cost is a big one.

And the next big crisis, you mark my words, Lawrence-and Niki will jump on this, you watch-that the next big crisis within the decade is not, Do you have insurance, but, Do you have a doctor, do you have a nurse? These are all things that nobody wants to talk about right now. But if we're going to talk about comprehensive, we need to talk about these kind of coverage issues. We got to talk about costs. We got to talk about the whole issue of, How are we going to get the lawyers not to take a pound of flesh out of this issue...

O'DONNELL: All right, Congressman Bilbray...

BILBRAY: That's a challenge.

O'DONNELL: ... we will bring you back to talk about that. Thank you, Congresswoman Tsongas and Congressman Bilbray.

TSONGAS: Thank you, Larry.