This is a rush transcript from "On the Record," July 31, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Well, it's war on Capitol Hill. It's about health care. Right now, no one knows for certain what will happen. Will the far- left Democrats get their way, the conservative Democrats known as Blue Dogs, or something in between? And what do the Republicans want?

Senator John McCain joins us live. Good evening, Senator. Nice to see you.

SEN. JOHN MCCAIN, R - ARIZ.: Thank you, Greta. It's good to be back with you.

VAN SUSTEREN: All right, Senator, so this is a big rush, rush, rush, let's get it done. So how come everyone's going on vacation? If this is so important for the American people, can't you all stick around and fix this? I mean, you tell us it's important.

MCCAIN: There's two things we never miss, and that's pay raise and vacations. And this isn't any different. But maybe...

VAN SUSTEREN: Well, it...

MCCAIN: But maybe -- maybe, Greta, it's a good thing to do because we need to now stand back. The Congressional Budget Office has judged this as no cost savings, in fact, an additional trillion dollars. Let's step back and reevaluate, and maybe when we come back, sit down and really negotiate on a truly bipartisan basis, rather than just trying to pick off a couple of Republicans.

VAN SUSTEREN: Well, I'm all for that, but you could take this 30-day vacation, those who want to get it done, and whatever the recess is, you could sit down and you got plenty of time to do it. You got 30 days. But anyway, I won't belabor that. The point is made that, you know, the American people wonder why the -- it's being pushed so heavily, and yet it can't be done now. Vacation matters more.

All right, second question I have, in writing this bill, do you see any lobbyists on Capitol Hill? Or I mean, what role, if any, do the lobbyists play in writing this bill?

MCCAIN: A lot. If you look at the biologics with this, that's the generic drugs which are inhaled or injected, the lobbyists, the PHRMA, got exactly what they wanted, 12 years before a generic can come on the market. Yes, their fingerprints are all through it. Whenever you get legislation that comes up to a thousand pages -- they had 1,200 amendments on the bill that we did through the committee. And by the way, the Blue Dogs, they bark, they never bite. They roll over and then they play dead.

VAN SUSTEREN: So do lobbyists actually write any of the language in these bills? I mean, physically write it or dictate it?

MCCAIN: I don't know if that's the case this time. I've seen it in the past when -- especially when we had unlimited soft money. But there's no doubt about their substantial investment in lobbying. I mean, they wouldn't be making these kinds of investment in lobbyists if they didn't expect something in return, and they get it.

VAN SUSTEREN: In terms of this bill -- and I realize that it's -- it's sort of -- I mean, I'm not -- I'm not sure anybody really truly knows what it is. We know it's about 1,100 pages, but -- I assume that -- is the government taking over health care decisions or not, or is that sort of just sort of the scare tactic by its opponents?

MCCAIN: Well, first of all, it's very clear to me that if you have a quote, "public option," you've either got one of two things. You've got -- instead of 1,500 health insurers, you got 1,501. Or you're going to have government have an enormous advantage which will over time have people gravitate into the government option, which then means a gradual government takeover of the health care system. I think that's what would happen if we adopted the present proposal.

VAN SUSTEREN: Do you have a solution? Or if you could dictate what we should do, what would you dictate?

MCCAIN: I would dictate going across state lines to get the health insurance of your choice, wellness and fitness, outcome-based treatment. That's -- in other words, take a patient that has a certain problem and treat them for the outcome, rather than each individual procedure. I would have rewards for wellness and fitness, which would even be in the form of cash rebates, if people practiced wellness and fitness.

Clearly, medical malpractice reform, which is not in any of these bills, which in itself is $100 billion a year, and work on eliminating $350 million that's fraud, waste and abuse. That -- allow small businesses to join together to negotiate with health insurance companies, guarantee people with preexisting conditions health insurance. It's -- there's a whole lot of things you can do to bring costs under control.

The bottom line is Republicans believe that the quality of health care in America is the best in the world. We need to control the costs. Democrats believe you need to fundamentally change health care in America. That's why we haven't been able to agree. And I'm sorry for the long answer.

VAN SUSTEREN: Well, I'm not trying to give you or Democrats a lot of extra work. I know you guys are really busy. I mean, I've seen how hard politicians work in this city. But let me (INAUDIBLE) this is a bill that's going to transform us, no matter what it ultimately is. It's going to have a huge impact. President Obama has, at a town hall, invited any member of Congress who wants to go to his -- go to the White House and go through it line by line -- how about that? Why -- you know, why don't you sign onto that and go through it line by line with him, and all of other Democrats and Republicans on the Hill?

MCCAIN: I would be glad to, but when you've got an 1,100-page bill, I'm not sure that the president's time is that well used. I'd like for him to go line by line over these appropriations bills which are earmarks, corruption and pork barreling, which continues to go on unabated, which he promised to do during the campaign.

But what we really need to do, Greta, is to sit down with genuine negotiations, Republicans and Democrats across the table from each other. I have the highest regard and respect for all the Republicans, but it's got to be a real bargaining and negotiating session, not just Democrats writing the bill and then us trying to change it.

VAN SUSTEREN: You know, I don't mean to be sort of nasty about the whole vacation thing. You say the president doesn't have the time, and I know he's extraordinarily busy. He has to worry about North Korea, Iran, everything else. But everyone is sort of taking a vacation this month, and everybody sort of signed up for this job, and it is sort of an emergency. So you know, like, I don't know. I think everyone could take vacation time and go through it line by line. I mean, I -- I don't mean to take it away, but you all signed up for this job.

MCCAIN: Yes, but I -- it's not so much going -- what I'm trying to say is it's not so much going through it line by line. We know where the differences are. We know that their approach is the government option, employer requirement, lack of medical malpractice reform, all of those things that I told you about. We could address those issues that are differences.

And by the way, I'm going to be visiting -- I will be traveling to places that are not vacation spots during vacation -- during the recess, as well.

VAN SUSTEREN: And I should say that I know that a lot of members of Congress are not -- they're not sitting on the beach getting -- you know, they're not doing that. I realize that. They're doing other work. I didn't mean to be so flip about it because -- I mean, I do admire all of you because, you know, it's a tough job.

One last question. Can you call the president and say, How about -- you know, let's -- you know, let's talk about these particular issues? Or can you call the leadership, the Democratic leadership in the Senate, and actually get some traction on these issues?

MCCAIN: Well, until public opinion turned against the president's plan or the Democrats' plans, or whatever it is, they weren't willing to do that. Perhaps they will now. Also, the president needs to come up with his proposal. That has not happened. So far it's been written in both houses. So public opinion is very wary of it, particularly about its enormous effect on an already burgeoning deficit and debt. We're committing generational theft. And maybe we can come together and sit down and negotiate our differences out in a bipartisan -- a truly bipartisan fashion.

Look, I understand. They have the majority. They have the votes, and that's the way it works. But don't call it changing the climate in Washington.

VAN SUSTEREN: Senator, thank you very much. I just want to add I didn't mean to be flip about the vacation. I know, for instance, Senator Lindsey Graham is spending his 30 says -- he's got active duty in Afghanistan, so I know -- and I know it's true of Democrats. They're out working the next 30 days. So I didn't mean to be disrespectful, sir, just flip.

MCCAIN: Oh, you're not at all -- you're not at all, Greta. And sometimes -- I think you have a very strong argument that we should stay at work, but the point is, we're not, so let's try and serve our constituents in the most effective fashion.

VAN SUSTEREN: Nice to see you. Thank you, sir.

MCCAIN: Thank you.

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