This is a rush transcript from "Your World With Neil Cavuto," June 25, 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, being a little facetious here, but the bottom line is, we're looking at a trillion bucks here and now, apparently, what is considered to be, at least given the run-up in Wall Street today a bargain at only a trillion bucks, because senators today were happy that they managed to drop the price tag for health care reform to that level, but offering no real solid details on the tax hikes that might be needed — needed to pay for it.

President Obama hinting a tax on benefits is possible, but Robert Shapiro says, even that might not bring in enough. Robert is the former undersecretary of commerce in the Clinton administration.

Robert, always great seeing you. Thanks for coming.


CAVUTO: So, you're saying, you know, look, like Max Baucus of Montana, we have this goal. It's a meritorious goal, but now we have to find a credible way to pay for it.

And — and how would you pay for the — one of the ideas on the table is to tax the upper income's health benefits, anywhere from $100,000 to $200,000, and that's going to get you, I think, almost a quarter of the way there, not even.

So — so, then what?

SHAPIRO: Well, that, of course, doesn't get you there.

Video: Watch Cavuto's interview

There is a general problem with taxing health care benefits that hasn't really been noticed much. And that is, if you tax most people's benefits, you're going to begin to unravel the employer-provided health care system.

And, if you do that, then you have to have a public plan as part of health care reform. This is kind of something that the McCain people overlooked in the campaign, that they wanted to tax the benefits, and not provide a public plan so that all the people who lose their coverage as the system — as the employer-based system begins to unravel have another place to go to.

CAVUTO: But that's assuming that...

SHAPIRO: But the...

CAVUTO: ... if your benefits are taxed, you drop them.

SHAPIRO: It assumes that, if the benefits are taxed, it costs you more. That's all. That's all it assumes, and that, on the margin, those people who can't afford that increase lose their coverage.

CAVUTO: All right.

SHAPIRO: That's all this is.

CAVUTO: But, Robert, you know, one thing I like about you is, early on in your career, you were always — you had big goals, big plans, but you are always trying to find ways to pay for them.

What troubles me...


CAVUTO: And, by the way, Republicans, too, are on this board to — to get some sort of health care.


CAVUTO: No one has a real satisfactory way to pay for all of this.


CAVUTO: Can you answer me this, Robert?

SHAPIRO: Well, look...

CAVUTO: I — can you say that — I have always argued that, in order to pay for this, everyone is going to have to have skin in the game. Everyone is going to — to pay for this.

Am I fair in saying that?

SHAPIRO: You are not only fair; you are absolutely correct, Neil.


SHAPIRO: The fact is, look, solving the issue of the uninsured is only the beginning of what we're going to have to do with health care in the next couple of years.

We have a financing tsunami looking down on us from Medicare and Medicaid. We — we can't begin to finance Medicare and Medicaid just looking five years out. As more and more baby boomers retire, more — and retire at the age at which the most expensive-to-treat common conditions, heart diseases and cancers...

CAVUTO: Right.

SHAPIRO: ... are most prevalent. So, we are going to...

CAVUTO: But you were warning about this — my hat off to you again — you were warning about this a long time ago, and saying we — before...

SHAPIRO: Long time ago.

CAVUTO: ... this freight train comes, here's what we can do.

Now the freight train...


CAVUTO: ... is staring at us in the face.

Is it almost too late to do — to do that?

SHAPIRO: No. I think what we're going to — well, we're going to have to do different things than we might have been able to do if we had addressed this 10 years ago or 12 or 15 years ago.

Then, we could have begun to reduce subsidies for particular sectors in the budget...

CAVUTO: Right.

SHAPIRO: ... and what I used to cut call and invest. You cut out the stuff, these — which is really kind of corporate pork.

And — and you begin to shift those resources. But now what we're looking at is a financing problem that eventually is going to require a dedicated tax. We're all going to have to say, OK, here is a new tax that we're all going to accept, and it's going to pay for Medicare, everybody's Medicare and Medicaid and whatever piece of the health care coverage for working people can't be picked up through the private market.


CAVUTO: Very good point.

SHAPIRO: ... the numbers are large enough that there is no other way to do it, looking out five and 10 years.

CAVUTO: I wish we had more time. It is always great seeing you, Robert. You were talking about this stuff when nobody was.

Robert Shapiro...

SHAPIRO: I appreciate your remembering it.

CAVUTO: Well, I do.


CAVUTO: I talked to you back then, when we were younger.

Robert Shapiro...

SHAPIRO: Yes, when we were all younger.


CAVUTO: Great seeing you.

At least you were a secretary.

SHAPIRO: Thanks, Neil.

CAVUTO: All right.

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