SPECIAL REPORT

Health Care Coverage Off the Menu?

This is a rush transcript from "Special Report," September 30, 2010. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY: Discussions like th at with regulators happen all the time. The crux of that story was whether or not that coverage was going to be dropped. McDonald's said that that just simply wasn't true.

EDMUND HAISLMAIER, HERITAGE FOUNDATION: You have a piece of legislation that really wasn't well thought out where you are just giving really a blank check to a bunch of regulators to kind of make it up as they go along as these questions pop up.

(END VIDEOTAPE)

CHRIS WALLACE: What they're talking about is a story in today's Wall Street Journal that says McDonald's has warned regulators that it could, could drop health insurance for 30,000 workers unless a provision of health insurance reform is changed.

Let's bring in the panel, Steve Hayes, from the Weekly Standard, A.B. Stoddard, of The Hill, and syndicated columnist Charles Krauthammer.

We have got to point out right at the start, McDonald's denies the story and denies it has decided to do anything, but there is, Steve, clearly a new requirement in the new healthcare reform law world we're going to be living in that companies are worried about. It would seem to be even the possibility that a company like McDonald's might have to drop its 30,000 workers is damaging.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: Well, I think McDonald's was backtracking because it probably didn't expect the memo to go public. The memo, itself, did in fact suggest that McDonald's might -- take the language verbatim, "It would be economically prohibitive for our carrier to continue offering the mini-med plans." They talk about places that it would deny coverage to 29,500 existing McDonald's employees.

So I think the reporting was correct. Now whether that means that McDonald's overstated it to make its case to regulators to try to say you don't want to face a story where 30,000 people are without health insurance, but that is clearly McDonald's said.

Look, I think this is a problem for the administration because it comes as part of a longer stream of reporting on these things. If you read the front pages of the New York Times and the Washington Post and Wall Street Journal these days, it reads like Republican Party talking points before healthcare passed.

You've got seniors who are going to be denied certain benefits. You've got insurance premiums going up. You had the president at his own press conference a couple weeks ago say that he never promised that this was going to save money or that this wouldn't be expensive. He did in fact make that promise. He said it would save money and in fact he said we'd cover 30 million more people basically for free.

WALLACE: A.B., let's look, because they have begun to pile up, some of the arguments for and against healthcare reform as voters are going to cast at least a partial verdict on it in the November election. Let's put these on the screen.

The arguments against -- according to studies, some of these you mentioned, Steve, premiums will likely double in the next decade. More than 87 million Americans won't, despite what the president said, be able to keep their current coverage. And reform won't bend the cost curve down. The country will spend $311 billion more on healthcare in the next decade.

Here are some of the benefits so far -- parents can keep children up to age 26 with their coverage. Children with preexisting conditions can't be denied coverage. And eventually more than 30 million uninsured will get coverage. So how does that balance out?

A.B. STODDARD, ASSOCIATE EDITOR, THE HILL: Well, there are very upsetting indications that industry in reaction to this law are going to pull back, pharmaceutical companies are not going to be able to -- they are going to have to raise prices in order to make up for lost revenue because of discounts that are going to be offered to seniors that fall in the doughnut hole.

And then you have big insurers like Cigna and Coventry One and WellPoint saying that they might no longer offer child only programs coverage and only continue covering those under existing coverage.

You look at the expansion of Medicare, the subsidies that are going to be provided to try to continue to cover more people, that looks like a long-term entitlement. It doesn't really make us comfortable that this bill is going to save healthcare costs overall. And I think that also experts think that the costs to Medicare -- the cuts in Medicare are not really going to be realized.

And when the voters assess what's happening to their own plans and when they read about what is happening to other people's plans and that it might actually just be exploding entitlement that doesn't save money, they are going to get more angry than they are right now. And right now polls are holding steady --

WALLACE: Let's bring up one of the polls. According to the latest Fox News Opinions Dynamic poll, which is out today, 46 percent now favor not changing, repealing healthcare reform, 42 percent oppose repeal. Charles, this is not turning out to be a big political winner for Democrats.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: It's a loser. And I think this case; the McDonald's case is a perfect example of why it is. This is only one provision in the bill of 2,000 pages. So imagine what else, what other landmines are hidden in this.

And the case here I think it's extremely instructive. Why is it that McDonald's would even think about dropping its coverage? The reason is that there is a provision in the law that the Democrats have decided no health insurer can spend more than 15 or 20 percent of its income on overhead and profit.

WALLACE: And 80 percent have to go to benefits.

KRAUTHAMMER: I'm stating it the other way. So it's got -

(LAUGHTER)

WALLACE: We're agreeing.

KRAUTHAMMER: The point is that it cannot spend a lot on overhead. It defines it at 15 percent. So you got a private company, McDonald's, in a contract with a private insurer insuring 30,000 private employees, all of whom seem OK with this, having to undue this as a result of what? An arbitrary number Democrats have picked out of a hat.

Why 15 percent and not 12 or 18 or 16.7 percent? They pick it out of the hat because Democrats are doing this in the name of fairness. And what you get a provision that's utterly insane, utterly arbitrarily, incredibly inefficient.

And it contradicts what the president had said you can keep your plan. Of course you can. But if the employer cancels that plan, then you don't have a plan in the first place. I think it's really indicative of what is in the bill. That is only a single item. There are hundreds of these that are going to cause incredible inefficiencies and disruptions.

WALLACE: Unintended consequences.

KRAUTHAMMER: Some of them are foreseeable, and they ignored them.

WALLACE: All right, logon to our homepage at Foxnews.com/SpecialReport and vote for what you want to us talk about tomorrow in the Friday Lightning Round. But up next, negative campaign ads.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: He's been in Washington for decades. He knows how the game works. He created the game. And he's taken millions from special interests. And now John Boehner wants to talk about reforming Congress?

(LAUGHTER)

Now that's funny.

SEN. BARBARA BOXER, (D) CALIFORNIA: Do me a favor. Could you say "Senator" instead of "ma'am"? It's just a thing; I worked so hard to get that title. So I'd appreciate it. Yes, thank you.

CARLY FIORINA, GUBENATORIAL CANDIDATE R-CALIF.: Twenty-eight years in Washington and Barbara Boxer works hard for a title?

(END VIDEO CLIP)

WALLACE: Well, it's that season again, the final weeks of the campaign, when both sides bring out the knives, or as Charles Krauthammer likes to say, it's the most wonderful time of the year.

(LAUGHTER)

Charles?

KRAUTHAMMER: How long have you been working on that?

(LAUGHTER)

WALLACE: But it's interesting, because we had as our text to vote issue last night negative advertising. By an overwhelming margin viewers said it was dirty politics, not fair game. I know you don't like to go up against the viewers, but are they being overly sensitive?

KRAUTHAMMER: Look, there are two kinds of negative ads, personal and political, or policy. The policy negative ads are perfectly OK. Yes, of course, corners are cut as in the Boehner ad. I mean, what member of Congress hasn't taken special interest money? It's kind of absurd.

But look, advertising is legalized mendacity. When you see an ad in a football game that tells you essentially if you drink the right beer or you drive the right car, you are going to get chicks. Nobody sues them on the grounds of false advertising. So everybody understands that. That's the rules of the game.

I draw the line personal attacks on family or personal issues which I think are completely out of bounds. And that happens as well. But I think if it's on policy or how a person has conducted himself in office, absolutely OK.

WALLACE: Well, let me go to you on that, A.B., because it now turns out that the Democrats have been doing research for months now and digging up stuff not on policy but on business histories, personal histories about a lot of GOP opponents, and they are running attack ads based on what they've found, guys who declared bankruptcy or had messy divorces. One, is that effective? Two, is it over the line?

STODDARD: Well, I don't think it's over the line, because I think if you fail to pay your taxes and you're an irresponsible person, that's of note.

What's interesting is that Congressman Melancon in Louisiana is running a two-minute ad on Senator Vitter's prostitution baggage. And he just won his primary by 40 points or something. I don't think anyone in Louisiana is listening to it. They haven't for two years.

Sometimes these can be potent. I think for Democrats they don't have any choice. They're not running on the record. They are not defending their accomplishments. This is all they have left.

What I think in terms of the season is it's too late. I think that the momentum that the Republicans have right now, most voters have really cemented their thinking by the first week of October. Not a lot of ads at this point are really going to change their mind.

There are some voters and there are probably independents who are skeptical of Republicans. They voted them out in 2006 and 2008. They are not happy with Democrats. Maybe a few of them stay home when they see some ads about people refusing to pay taxes or skirting the law. I think it'll just help on the margins. I don't think it will change the trajectory, though.

WALLACE: Steve, do I have this right that you think negative ads are fine as long as they're accurate?

HAYES: Yeah, look, if you do a negative ad like the one we showed last night with Kendrick Meek quoting Charlie Crist extensively, Charlie Crist's own words talking about how he was conservative and how he liked Sarah Palin's speech, things that would not appeal to Democrats in Florida obviously, that's a negative ad. It's great ad. It's an accurate ad. It's fantastic.

WALLACE: OK, I think everybody would agree that is a fair ad, except for Charlie Crist. But how about when it gets into somebody's business dealings, somebody's personal life, things that are a matter of record?

HAYES: I think you have to make some distinctions. I think if anyone attacking a spouse or a kid that is clearly over the line. On the other hand, if somebody has done things in their business past that are unseemly or got them in trouble, of course that's fair game. It reflects I think on the character of the person running for office.

WALLACE: And how do you feel about the question that A.B. was talking about? The public has a lot of doubts right now about the Obama agenda about Democrats on policy. To what degree can they counteract that on the Republicans on these personal issues or business issues?

HAYES: I think they are going to try. I would say as a general rule, there will be exceptions, of course, that this kind of negative advertising won't work for incumbents because people want to throw them out, particularly Democratic incumbents. People don't want them in office. They can't run on their records. There is this anti-incumbent but largely anti-Democratic wave.

So negative attacks in general are not going to help them as much as they might help or make a difference in an open seat where people aren't as familiar with the officials, with the public figures, and could, you know, could have some kind of an impact.

WALLACE: Charles?

KRAUTHAMMER: I think there will be one theme, a lot of scatter shot personal attacks. There will be a theme that some Democrats have used, which is the Republican candidates are extreme. And they're going to say kooky ideas on Social Security and other items.

I don't think it will work because I think it's going to look desperate. I do think the Democrats have a real hard time running on accomplishments. Look at the Congress which hasn't even passed a budget and not a single appropriation and can't even decide what to do on taxes. So it's got a sorry record. And I think it will resort -- the Democrats have only one resort -- attack, attack, attack. I think it will be extremism which I am not sure it's going to work.

WALLACE: And ten seconds, is it a character flaw of mine that a clever, well tuned out negative ad I find very appealing?

KRAUTHAMMER: I think it's a sophisticated sense of cynicism and I would admire that in you.

(LAUGHTER)

WALLACE: That's it for the panel.

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