DOWD: Good morning, everyone. Joining me now, Secretary of Health and Human Services and former Kansas governor, Kathleen Sebelius.

Welcome to the show.

SEBELIUS: Thanks, Matt.

DOWD: Well, it's your anniversary of your nomination to the Cabinet, so happy anniversary.

SEBELIUS: Oh, thank you.

DOWD: You're ready for a vacation?

SEBELIUS: Well, it's been a very exciting and interesting place to be. I wouldn't have missed it.

DOWD: Well, I wanted to sort of start out broader, about 10,000 feet, and have you reflect back on the last year. A year ago, if you think about where things stood, the Democrats were enthusiastic, everybody was engaged, the independents were totally on board, people were (inaudible), Democrats in the administration were riding a big wave, and today a year later, things aren't as they were back then. And we put together some glass to sort of show the graph of that. If you can see from these graphics, president's approval is way down from a year ago. His approval on the economy is way down from last year at this same time, and his approval on health care reform is way down from where it was back then. And so the question I have is -- it's Oscar night today, so I'm going to paraphrase from a movie, "Wizard of Oz," we're not in Kansas anymore. And I just want to know, what do you think happened over the course of this year and why we are where we are today?

SEBELIUS: Well, Matt, I think that a lot of Americans are worried about what happens next, worried about jobs and the economy, worried about their health security, want to know, you know, will they be able to protect themselves and their families? And certainly the current situation is shaky.

The first thing the president did was a big job spill with the Recovery Act, and that is beginning to pay off. Stabilize the economy. We're seeing finally a stop in the bleeding of job loss, and hopefully we'll see a pickup in -- we've seen a huge pickup in productivity; we're going to see that followed by jobs.

But the worrying about health security is still going on. It's why the president tackled it in the beginning. You know, we see people opening their statements this year and having jaw-dropping rate increases, and they have no control over it. They feel like they are really caught in the middle.

DOWD: Do you think the administration has made any mistakes at all along the way that have led to where he stands today, that they made errors or dropped the ball on anything over the course of the last year?

SEBELIUS: Well, I don't think there is any question. The president would have loved to have the health debate move at a more rapid pace. You know, you referenced my coming out of Kansas. One of the things that happens in legislative sessions in state legislatures is that they have a timetable. We have to pass a budget. You have to move things forward. That's what I get from Americans all over the country. They want something to be done. They want things to move to the next step, and I think that's why the president now has called on Congress to have an up-or-down vote on health reform. Let's get the job done, let's finish what has been talked about for the last year, and make health reform real for American people.

DOWD: Well, do you think one of the mistakes, as you reflect on this, that maybe the president should have been more aggressive or more assertive or more clear earlier on health care, that he waited too long, until the last couple of weeks, to really engage on it and present what he thought was the right thing? Do you think that was too long of a time and ceded too much authority to Congress too early?

SEBELIUS: I think there's a balance. Clearly, the members in Congress had to arm (ph) the legislation or it was dead on arrival. It couldn't have been written in the White House and dropped on Congress. You can't imagine how many conversations I had with folks during my confirmation hearing who thought I must have the bill in my purse, you know, just waiting for it to be given. So that took a while for Congress to fully engage.

But there have been more hearings, more discussions, more debates, more ideas, more plans, and the president, I can tell you, has been fully engaged from day one. What I can tell you, because of that partnership, the bill has passed the House, the bill has passed the Senate with a supermajority. We have comprehensive legislation for the first time. We are in the final chapter, mostly because the American people are desperate. They are caught in this world where they have no control over their insurance rates. They are seeing next week, next month, their rates rise enormously, and over and over again, people are losing their coverage.

DOWD: Well, one of the things that, one of the things that people have faulted the administration for is not building a more -- bigger and stronger bipartisan coalition on health care reform, that they're faulted for that. And even if you reflect back on President Obama, then candidate Obama, talked a lot about the desire and need to build a bigger and broader coalition in order to get things done. And we have pulled something from one of his speeches there that -- let's listen to it and then I want to talk about that.

SEBELIUS: Sure.

(BEGIN VIDEO CLIP)

OBAMA: (inaudible) presidential politics. (inaudible) 50 plus one, but you can't get it. (inaudible). We're not going to pass universal health care with a 50-plus-one strategy.

(END VIDEO CLIP)

DOWD: Is it -- didn't the president, then candidate Obama, warn against just what the administration is doing and just what Democrats in the House and Senate are doing? He warned against exactly what's happening today.

SEBELIUS: Well, actually, I think part of the pace of this debate was a real attempt to have a bipartisan approach. The House bill had Republican support. In the Senate bill, there were months spent with six senators, three Republicans and three Democrats, in a room, negotiating, adding ideas to the bill, trying to figure out a strategy to move forward in a bipartisan fashion.

As you know, the Senate bill didn't pass 50 plus one, it passed with 60 votes, a supermajority, and I think the president would love to have Republican votes. What he has is lots of Republican ideas -- selling insurance across state lines, making sure that we crack down very aggressively on fraud and abuse, you know, moving forward.

But there is a fundamental difference. The Republicans feel strongly that insurance companies should have less regulation than they do now, less consumer protection, less oversight. The president feels strongly that we need to change the rules of the road, that we can no longer have a private health system where insurance companies get to pick and choose, where they can lock people out and price people out. And that's really one of the fundamental divides. And even though there are lots of Republican ideas in the bill, I'm not sure -- you know, we are hopeful that there will be Republican votes, but I'm not sure there will be.

DOWD: Well, I think one of the big Republican concerns and a concern of a lot of other people, including Warren Buffett, who mentioned it this week, is that what is going to happen with costs? Is anything getting really done with costs? I think everybody agrees that coverage will be expanded to 30 million people or so, but cost is the real factor. And what three things in the bill will lower health care costs in the next three years? In the next three years, by 2012, what three things in the bill that the president is pushing will lower costs?

SEBELIUS: Well, there are huge delivery changes in the bill. So looking at where we're spending money right now, that not only it's not adding to health quality, but drives costs. Patient readmission, the changes will be beginning, so we begin to pay hospitals based on who does good follow-up care and who doesn't. Good for patients, good for costs. (inaudible) care, working in a more coordinated fashion with providers and hospitals. The kind of medical help that people actually really like as patients that also really pays huge dividends, so you coordinate care. The introduction of health information technology, which really drives a lower error rate for docs, but also dramatic administrative simplification. Taking of that 30 cents of every dollar that does not pay for health care and taking it out of the system. Certainly the issue of taxing insurance plans, the highest priced insurance plans, beginning to change those patterns. Economists all say has a huge cost driver. The Medicare commission is a huge cost driver.

DOWD: One of the things, the other thing that I think Republicans have raised is a concern about the expansion of the deficit by this bill, and Representative Paul Ryan, who was at that summit--

SEBELIUS: Right.

DOWD: -- spoke about that, and talked about the sort of budget shenanigans in his view that are being done to make it look better than it is. And so, let's watch that tape.

(BEGIN VIDEO CLIP)

RYAN: The bill has 10 years of tax increases, about half a trillion dollars, but ten years of Medicare cuts, about half a trillion dollars, to pay for six years of spending. Now, what's the true ten-year cost of this bill? In ten yeas, that's $2.3 trillion.

(END VIDEO CLIP)

DOWD: Is he right about that, that you're basically saying we're going to have ten years of revenues, (inaudible) six years of cost, and that makes the bill look better than it is?

SEBELIUS: Actually, he's absolutely wrong about it. The neutral, nonpartisan Congressional Budget Office says just the opposite, that there is about $150 billion, $130 billion in savings the first ten years. But then almost $1 trillion in deficit reduction. In fact, most of the savings don't even kick in until after 2014, after the bill has expanded. They go out the full two decades. They look at all the spending, all the savings.

And I would say, Matt, that the Congressional Budget Office is very conservative in the savings. They really don't say prevention and wellness efforts save any money, and we think that saves a dramatic amount.

DOWD: But doesn't the Congressional Budget Office only make those assumptions and that analysis based on what they get? And so if the legislative leadership tells them to analyze this according to ten years of revenue and six years of expenses, they put out a bill that says it makes it -- it saves on the deficit?

SEBELIUS: What we're both talking about and what Representative Ryan referred to is the first decade, where some of the implementation strategies are measured as people have demanded, you know, look at the costs first before you add new people. That's exactly the way the bill is structured, but then they look at the second ten years.

So the notion that somehow we have tricked the American public -- I mean, when you look at 20 years and they say the first ten years is $130 billion worth of deficit reduction, the second ten years is a $1 trillion. This is hardly a gimmick.

DOWD: Well, one final controversial thing that has to be resolved, as you know--

SEBELIUS: There's not just one final--

(CROSSTALK)

DOWD: One very important, I think, controversial thing, is that a few votes -- Representative Bart Stupak has talked about the need that the Senate bill has to include abortion language that was in the House bill, to prevent federal funding of abortion and an expansion on services. He says he carries with him 11 votes. Can you pass a bill or can the president pass a bill and the Congress pass a bill without those votes?

SEBELIUS: Well, the goal is the same. The president has said from the outset, we don't want to change the status quo on abortion funding. Neither the Senate or the House bill has any federal funding for abortion, none. Yes, abortion services are provided, and people will pay out of their own pockets, in both the Senate and the House, but they do it in slightly different ways--

DOWD: Is Representative Stupak wrong about this?

SEBELIUS: Well, I think Representative Stupak has worked as a member of Energy & Commerce. He wants universal health care. He wants health reform for the people whom he represents. I think we'll continue to work on getting this done. He shares the goal with the president, that no federal funding will be provided for abortion.

DOWD: Do you think a deal can be done that does not include the language he wants, but something in (inaudible), is that one of the things that can be considered?

SEBELIUS: I think the Senate bill, actually, has a different set of words than the amendment that Representative Stupak had in the House, but confirmed by legal scholars and various people that it does exactly the same thing. There are no federal funds for abortions. But I think that if that does not satisfy the congressman, the conversations will continue. But certainly, his goal and the president's goal are the same -- do not change the status quo on abortion.

DOWD: Well, lots of interesting issues to resolve and a deadline that the president set for March 17th, trying to get the House to pass the Senate bill in the House before he leaves on his foreign trip. I appreciate you being here. Thanks for coming.

DOWD: We're joined now by the Senate Minority Leader, the point person for the Republicans, Republican Mitch McConnell. Thanks for coming.

MCCONNELL: Good morning. Glad to be with you.

DOWD: Well, in the last few months, Republican have been very successful at winning some elections. Democrats have also taken on quite a bit of water on health care and politically. But we found an interesting graphic that I'd like to talk to you about. This graphic shows who does the American public trusts on health care. 49 percent say they trust President Obama; 37 percent say they trust the Democrats in Congress; and only 32 percent say they trust Republican leaders in Congress. And if you're in third place on this, even though things are politically in a good place, why is that?

MCCONNELL: Well, you see, Matthew, it's about the bill. It's about the policy. Not about the president, not about Senate and House Democrats and Republicans. It's about the bill. The American people are focused on this like a laser. Everybody is interested in health care. Obviously, when you get older, you're more interested in it, but everybody is interested in it. The American people have been deeply involved in this debate. What did they see? They see a bill that cuts Medicare by half a trillion dollars, that raises taxes about half a trillion dollars, and that almost certainly will raise the cost of insurance for those on the individual market.

They also see the way it was passed, the cornhusker kickback, the Louisiana purchase, the gator-aid behind closed doors. They look at this whole package, both in terms of the policy and the process, and they say they don't want it.

And so what you see now, if I may just finish on this point, is an argument not between Democrats and Republicans but it's between Democrats and their own constituents.

DOWD: Well, I think Republicans have obviously put up a blockade to try to keep this from happening at all, even while the Democrats have had a majority in the Senate.

But I, sort of, want to focus on, what Republicans do to change that message in where they get some benefit out of this?

Right now, it's as if the country says "a pox on everyone," including the Republicans, who, as the graph shows, are in third place.

What can Republicans do to affect that and get -- have a better place in the American public?

MCCONNELL: Well, look, you're talking about the election in November. I'm talking about the policy in the country now. What the American people would like us to do is not make this gargantuan mistake, in spite of Secretary Sebelius's best efforts. What we're talking about here is a $2.5 trillion spending program, brand-new entitlement.

We are drowning already in a sea of debt. The Congressional Budget Office numbers just came out Friday. We're looking at $10 trillion in new debt in the next 10 years, Matthew.

People are very, very skeptical about starting a whole new government program when we're drowning in a sea of debt.

DOWD: Well, you know, if you take a look at what the American public's perception on this is, it's hard for them to trust either side on debt and on the deficit and on spending.

They saw the deficit rise dramatically during President Bush's presidency and while you were majority leader. And they see it rise even more today. And in their view, neither party can be trusted on this.

So what makes it -- what makes you seem to feel that they'll trust the Republicans when they talk about the debt as opposed to the Democrats?

MCCONNELL: Well, again, you're talking about what may happen in November. I'm talking about what's happening now. We are -- we are spending -- we are on a gargantuan spending spree. The American people would like for us to stop, quit doing it, quit spending this massive amount of money and racking up these tremendous debts.

That $10 trillion figure added to the debt over the next 10 years -- half of it, over $5 trillion, will simply be interest on the debt.

So what I think the American people are saying to us -- stop this job-killing health care bill; we know it will drive taxes up and that will not be good to help us get out of the recession; step back and terminate the spending spree.

DOWD: Well, do you think the Democrats, at this point, will push through that bill by any means necessary?

So is your expectation that you're going to try as you might to kill the bill but they will end up passing the bill by any means they can?

MCCONNELL: Well, it seems that they're certainly trying to do that. I mean, as everyone understands, if the House passes the Senate bill, it goes straight to the president for signatures. So all of this discussion about the second bill, the reconciliation bill, is really, kind of, irrelevant. If the House passes the Senate bill, it goes to the president for a signature.

That means that every single member of the House who voted for this will have voted for the kickback, the purchase, the gator-aid, all of that, and the Medicare cut.

DOWD: That's an interesting question. So how does -- if the House Democrats pass the Senate bill, it basically, at that point, can go to the president.

How -- what is the procedure, then, that would prevent that from happening?

The House Democrats, I guess, have to trust the Senate Democrats that they'll take it up again?

MCCONNELL: Yes, the House has to trust the Senate that we'll go back in and fix the most egregious political problems.

But let me tell you what won't be fixed. What won't be fixed is the half a trillion in Medicare cuts, a half a trillion in new taxes.

And also, you wanted to talk about the politics of this a minute ago. Let's turn to that. The argument, incredulously, that the Democratic leadership and the president seem to be making to the wavering Democrats is, the best way to deal with this politically is to pass it and get it behind us.

Well, look, the only way to guarantee that it's ahead of you is to pass it. That means that every election this fall will be a referendum on this bill.

DOWD: Well, yes, and I wanted to get to that. You're on record as saying that, if they pass this health care bill, that you and the rest of the Republicans are going to campaign on repealing it.

And will you message be, at that point, that we're going to take away health insurance from 30 million Americans that now have it, based on this bill?

MCCONNELL: Well, as you pointed out to Secretary Sebelius, the benefits don't kick in for four years. All the American people are going to be confronted with in the next four years are these massive cuts to Medicare, not to make Medicare more sustainable -- by the way, we all know Medicare, right now, is going broke in seven years, and they want to turn it into a piggy bank to start a whole new program for a different set of people.

The tax increases kick in immediately. So there's nothing -- just looking at the politics of it, there's nothing but pain here for the next four years. Why in the world would they conclude that that would be popular?

DOWD: Are you worried that what's going on out there in America is not necessarily anti-Democratic, even though they've suffered at the elections?

Your colleague, Senator Kay Bailey Hutchison, lost pretty dramatically in a primary, and lost primarily based upon her Washington experience.

So as senators and congressmen go out and campaign who are incumbent Republicans, do you think they're in danger as well?

MCCONNELL: Well, I think, you know, everybody knows who's running Washington. There's a Democrat in the White House, a Democrat House, and a Democrat Senate, by very large majorities.

I think the American people are clear about who's running up the debt, who's been on this spending spree for the last 12 months.

DOWD: Well, one of the things, I think, that's complicated it, that's come up in -- recently -- is what's happened with Senator Bunning, and his desire to, sort of, stop the unemployment benefits bill by standing alone in -- in the Senate and getting that done. He also (inaudible) abdicated on that.

What I'm trying to understand is, why, if that principle is a good principle, that we shouldn't add to the deficit, why was he basically told to stand down, by the leadership, and not do that, even though that is supposedly a Republican principle?

MCCONNELL: You obviously don't know Jim Bunning very well. Nobody tells Jim Bunning to stand down.

(LAUGHTER)

He had a good point. I ended up voting with him. His point was -- it wasn't against unemployment insurance. He thought we ought to pay for it, make it deficit-neutral.

And, you know, all of us are deeply concerned about this. There was a fascinating piece in the USA Today, I think it was Friday, about the economy right now, and the only entity that's doing any good is the government. This new administration's added 120,000 government jobs, while the private sector's shedding jobs.

The average government employee now makes $70,000 a year, the average private-sector employee only $40,000 a year. These are boom days if you're a government employee. And the way we're financing that, Matthew, is to borrow money from our grandchildren so we can have more government employees now.

These are the kinds of things that Senator Bunning thought ought to be addressed by making it deficit-neutral.

DOWD: I'd like to turn to one final thing that's been in the news recently, which is this PowerPoint presentation that the RNC had put together about raising money.

It's very controversial. I'd like to show it to you, if you could take a look at this. They basically, as you can see -- it's how they're going to -- they're going to appeal to fear, extreme negative feelings, "reactionary," and, basically, in a very cynical way, most of the public would think, and in a very crass way, how they're going to appeal to them.

Is that something -- the kind of messaging that you think is going to be helpful in the course of this next year?

MCCONNELL: Well, its -- that sort of thing is uncertainly not helpful. I can't imagine why anybody would have thought that was helpful.

I mean, typically, the way parties raise money is because people believe in the causes that they advocate. I think the way we raise money from donors across America is to stand for things that are important for the country.

DOWD: You think somebody should be held accountable for that?

MCCONNELL: Well, look, I don't run the RNC. That's up to them. But I don't like it, and I don't know anybody who does.

DOWD: Well, I think that's all we have for today. I appreciate you being here, and thanks for coming.

MCCONNELL: Thank you.