L. KING: Joining us now on Capitol Hill from the Russell Rotunda, our friend, Senator John McCain, Republican of Arizona. He was the standard-bearer of his party last year and a member of the Health, Education, Labor and Pensions Committee.

First, your overall impression.

How was the speech?

SEN. JOHN MCCAIN (R), ARIZONA: Well, I thought the president is eloquent. I thought he had a lot of passion. I think it was more partisan than -- than I had expected, but -- and -- and there's a lot of questions that remain unanswered, I think. But he did give some more specific aspects of his -- of his overall proposal.

But a small example is that he says if you like your health insurance policy, you'll be able to keep it. The Congressional Budget Office says that if your employer goes to the health option and the employer -- the health policy that the government is providing and then you're going to lose the policy that you have with your employer. That's 10 million Americans, according to the Congressional Budget Office. Certainly, there are questions about how you're going to pay for this, as well, that will be explored in days to come.

L. KING: The president cited one of your proposals, Senator, tonight, as he made up -- as he made his case.

Watch. (BEGIN VIDEO CLIP)

OBAMA: For those Americans who can't get insurance today because they have pre-existing medical conditions, we will immediately offer low cost coverage that will protect you against financial ruin if you become seriously ill. This was a good idea when Senator John McCain proposed it in the campaign, it's a good idea now and we should all embrace it.

(END VIDEO CLIP)

L. KING: That had to move you, did it not?

MCCAIN: Yes. And I do believe that it's an important aspect, obviously. We've got to provide healthy -- available and affordable health care to all Americans. And one of the biggest problems is those that have the "pre-existing conditions." And this is, I think, obviously, a viable way to address that issue. I'm glad the president mentioned it.

And there are a lot of things we can agree on, Larry. There's many things that we can agree on and work together. Republicans want reform. We know that the system is broken, particularly Medicare. But we are very concerned about the cost. We're very concerned about this "public option." Frankly, some tests on medical malpractice reform doesn't get it. Hundreds of billions of dollars have been wasted in defensive medicine and medical malpractice reform, the requirement for it.

L. KING: What -- what is wrong -- Senator, what is wrong with, we have the Postal Service and FedEx.

What's wrong with a public option on health?

What's wrong with giving the Americans -- OK, if you can't afford this, we'll give you that?

MCCAIN: Well, the -- the Postal Service is -- is going broke. It has about a $7 billion deficit no matter what FedEx does.

Another point here is, is will the government option have an unfair advantage?

If it doesn't, then it's just one of 1,500 or more health insurance policies available -- health insurance plans available to Americans. If it has an unfair advantage, then, obviously, Americans are going to gravitate in that direction and private health insurance will be more expensive. So there -- there has to be some advantage here for people to leave their health insurance policy and that would be a government health option, in my view. And people would gravitate out of it -- out of public...

L. KING: Is there any...

MCCAIN: ...out of the private health insurance. L. KING: Is there any is there any good reason, Senator, in a government and in a nation this rich, why anyone -- anyone should go without health needs?

MCCAIN: There is no reason why there should not be affordable and available health insurance and health care for all Americans.

The question is, are you going to have the, "public mandate?"

Are you going to have costs which escalate to over $1 trillion and no way to pay for it?

Despite what the president said tonight, there's still no -- in the estimate of the Congressional Budget Office, a way to pay for this $1 trillion added burden onto the already $9 trillion in deficits we're going to have over the next 10 years anyway. It's -- we cannot sustain this kind of deficit. It has to be paid for. The president pledged to. So far, his numbers don't add up.

L. KING: All right. Now play politics with me.

Is he going to get a bill?

MCCAIN: I hope he gets a bill. I hope we can sit down together and do the things that all of us agree on. And there are a number of things that are -- that we can agree on. And I think the American people, obviously, want that.

I don't know what the administration and the Democrats will insist on. Facts are stubborn things. The bills so far have had no bipartisanship associated with it. They were drawn up by Democrats and Republican amendments were rejected. So there's going to have to be an entire change of atmosphere here in order for us to get something done in a bipartisan basis.

L. KING: Concerning all the complaints on the right -- the president pointed out some tonight. In fact, Sarah Palin, your -- your vice presidential candidate, raised the death panel issue today in an article in "The Wall Street Journal." And the president dealt a little with that, seeming to take a dig at her.

Watch.

(BEGIN VIDEO CLIP)

OBAMA: Some of people's concerns have grown out of bogus claims, spread by those whose only agenda is to kill reform at any cost. The best example is the claim, made not just by radio and cable talk show hosts, but by prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Now, such a charge would be laughable if it weren't so cynical and irresponsible. It is a lie, plain and simple.

(END VIDEO CLIP)

L. KING: What did you make of that, Senator? Did you agree with Sarah's -- the former governor's article today?

MCCAIN: Oh, I think that the president made an unnecessary comment there. It was partisan in nature. Look, the president keeps saying that if you like your health care policy, you can keep it no matter what. The Congressional Budget Office says you can't because if the government -- if your employer...

L. KING: I know, but did you...

MCCAIN: ...goes to another -- so, look, I'm not challenging the president -- I think it was an unnecessary comment and did nothing to contribute to bipartisan dialogue.

L. KING: But you don't believe there will be a death panel, though, do you?

MCCAIN: No. I do know that portions of the House bill were removed -- or one of the bills that's winding around here, which may have intimated such a thing. But -- and we know there's some questions about some of the manuals in the Veterans Administration.

But, look, instead of doing that, can't we sit down together and work together?

That might be a thought.

L. KING: One -- one other thing. Congressman Joe Wilson, Republican of South Carolina, we have found out, was the gentleman, if it can call that, who yelled out, "You lie!" when the president made a referral to non-citizens getting coverage of health insurance -- illegal aliens.

What did you make of -- of that Congressman doing that and your thoughts on that subject?

MCCAIN: Totally disrespectful, no place for it in that setting or any other and he should apologize immediately.

L. KING: Senator, thank you so much, as always, for joining us. Every time we call on you, you're right there.

We appreciate it.

MCCAIN: Thank you for having me on, Larry.

L. KING: Senator John McCain, Republican of Arizona.

We're going to continue the debate after this with the presidential adviser, Valerie Jarrett, from the White House, next.

(COMMERCIAL BREAK)

KING: All right. Now play politics with me. Is he going to get a bill? MCCAIN: I hope he gets a bill. I hope we can sit down together and do the things that all of us agree on. And there are a number of things that we can agree on. And I think the American people, obviously, want that.

I don't know what the administration and the Democrats will insist on. Facts are stubborn things. The bills, so far, have had no bipartisanship associated with it. They were drawn up by Democrats, and Republican amendments were rejected. So there's going to have to be an entire change of atmosphere here in order for us to get something done in a bipartisan basis.

KING: Concerning all the complaints on the right, the president pointed out some tonight. In fact, Sarah Palin, your vice presidential candidate, raised the death panel issue today in an article in the "Wall Street Journal." And the president dealt with that, seeming to take a dig at her. Watch.

(BEGIN VIDEO CLIP)

OBAMA: Some of people's concerns have grown out of bogus claims, spread by those whose only agenda is to kill reform at any cost. The best example is the claim, made not just by radio and cable talk show hosts, but by prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens.

Now, such a charge would be laughable if it weren't so cynical and irresponsible. It is a lie, plain and simple.

(END VIDEO CLIP)

KING: What did you make of that, senator? Did you agree with Sarah's -- the former governor's article today?

MCCAIN: Oh, I think that the president made an unnecessary comment there. It was partisan in nature. Look, the president keeps saying that if you like your health care policy, you can keep it no matter what. The Congressional Budget Office says you can't. Because if the --

KING: I know, but did you --

MCCAIN: Because if your employer goes to another -- look, I'm not challenging the president. I think it was an unnecessary comment and did nothing to contribute to bipartisan dialogue.

KING: But you don't believe there'll be a death panel, do you?

MCCAIN: No. I do know that portions of the House bill were removed -- or one of the bills that's winding around here -- which may have intimated such a thing. But -- and we know there's some questions about some of the manuals in the Veterans Administration.

But, look, instead of doing that, can't we sit down together and work together? That might be a thought. KING: One other thing. Congressman Joe Wilson, Republican of South Carolina, we have found out, was the gentleman, if it can call that, who yelled out "you lie" when the president made a referral to non-citizens getting coverage of health insurance, illegal aliens. What did you make of that Congressman doing that and your thoughts on that subject?

MCCAIN: Totally disrespectful. No place for it in that setting or any other. And he should apologize immediately.

KING: Senator, thank you so much, as always, for joining us. Every time we call on you, you're right there. We appreciate it.

MCCAIN: Thank you for having me on, Larry.

KING: Senator John McCain, Republican of Arizona. We're going to continue the debate after this with the presidential adviser, Valerie Jarrett, from the White House, next.

(COMMERCIAL BREAK)

KING: Joining us now from the White House, Valerie Jarrett, senior adviser to President Obama. What's the mood there after the speech?

VALERIE JARRETT, SENIOR WHITE HOUSE ADVISER: Well, very positive, Larry. I think that President Obama had a great opportunity this evening to speak directly to the American people and members of Congress, and be very clear about where he is on health care reform, and the importance of moving forward expeditiously now.

KING: He laid out a strong claim for the plan tonight. Let's listen to a portion of it and get your comment.

(BEGIN VIDEO CLIP)

OBAMA: But what we've also seen in these last months is the same partisan spectacle that only hardens the disdain many Americans have towards their own government. Instead of honest debate, we've seen scare tactics. Some have dug into unyielding ideological camps that offer no hope of compromise.

Too many have used this as an opportunity to score short-term political points, even if it robs the country of our opportunity to solve a long-term challenge.

And out of this blizzard of charges and counter-charges, confusion has reigned. Well, the time for bickering is over. The time for games has passed.

Now is the season for action. Now is the when we must bring the best ideas of both parties together, and show the American people that we can still do what we were sent here to do. Now is the time to deliver on health care.

(END VIDEO CLIP) KING: Valerie, the -- Senator John McCain just told us, while he appreciated a lot of the speech and thought it was delivered well, he thought the speech was partisan.

JARRETT: No, not at all. My goodness, he incorporated one of Senator McCain's key provisions that he suggested in the course of the campaign.

KING: Yes, he appreciated that.

JARRETT: So it wasn't at all partisan. It was a call to remember who we are. And he talked about the character of our country and he talked about what's at stake here, the many, many millions of Americans who are having to worry about whether they have a pre- existing condition and lose their insurance, or whether they changed their job, or they move, or any one of the number of thing that happens to everybody in the course of their life. They shouldn't have to worry about their health care, not in this country.

So what he said is, look, let's keep focused on the real issues. Let's have an honest debate. There may be substantiative differences of opinion, but what we all agree -- and I think if you survey the American people, everyone agrees that the status quo is no longer acceptable.

We even heard that in the comments from the Republicans afterwards. So if you agree to that, then shouldn't we also agree, Larry, that we're going to be honest with one another and we're going to have an honest debate and that we're going to keep our focus in what's in the best interest of the American people? That was his message tonight.

KING: What's he going to get, do you think, Valerie? And when is it going to happen? Is there a time constraint here? Does it have to be by the end of the year?

JARRETT: Look, we've already made a great deal of progress. I think the president said tonight 80 percent agreement. We've had four committees already act on their legislation. We have Baucus who said today that he expects to have a markup within the next week or so.

So we are well on our way. And I think that there is a lot of room for agreement. And there's certainly room for incorporating new ideas. He made it very clear tonight that he put down what his plan -- he put down what he thought was important for the American people, in terms of providing stability and security and affordable health care and cutting the costs and keeping everything we do deficit neutral.

He put his principles down and his plan down, but he also said, Larry, I'm open to new ideas. I'm open to suggestions. I will reach out my hand, as I always have. And I think that's what the American people expect from their president. It's what they expect from their leaders. And what he said tonight is that's what he expects from Congress. KING: One other thing, Valerie, David Gergen said a little earlier that this is a speech that maybe he should have made three months ago. Do you agree?

JARRETT: No. I think the timing was perfect. I think it was important for all of the committees to do their hard work. And many people in the chamber, as he said tonight, have been working tirelessly to move us in the right direction of health care reform. A lot of that important work had to get done. And through that process, he heard a lot of great ideas, which he incorporated this evening. And I think it was important for him to let that process work and then to reach the point now, as we are entering the home stretch, to really energize everybody, to bring this to closure.

We've waited far too long in this country. He gave us a great history lesson. He put it in context. And he showed us the direction for the future.

KING: Valerie, thanks so much. We'll be calling on you frequently.

JARRETT: I hope you do, Larry. Have a nice evening. Thank you.