This is a rush transcript from "On the Record," August 24, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Senator Tom Coburn joins us live. Senator, is there something you can do to help this woman, or can we help this woman or -- or what -- how do you respond to this?

SEN. TOM COBURN, M.D., R - OKLA.: Well, sure, we can help her. But remember, the first obligation is for her neighbors and us to help her here in Oklahoma. And we need reforms and we're going to get reforms, but the answer is not having the government in control of those reforms.

And so she immediately -- I invited her up to my office, and my case worker started working with her, and we'll help her and her husband. But the fact is, is one of the things that makes our country great is that we, as individuals, should be helping everybody around us, rather than transferring that to the responsibility of the government. And the government's never compassionate.

And that lady got everybody's heart in our town hall meeting, and I'll guarantee you the city of Oklahoma City's going to pick that lady up and her husband and help her. That's without a government program.

VAN SUSTEREN: You know, I -- I hate to -- obviously, the word "lucky" isn't the right word to use listening to this woman, but this woman -- I mean, the fact that you had a town hall meeting gave her an opportunity to be heard, to get the attention of you and to the community and everybody else. But the fact is, there are a lot out there who -- who -- you know, who can't make it to your town hall meeting. They might live in the far regions of Oklahoma or they may live in a state where a senator doesn't hold town hall meetings. What do you suggest for -- you know, we do have a problem in this country. What do you suggest?

COBURN: Well, what I don't suggest is tearing what's -- tearing what is good and great about our health care system down in the -- in the name of fixing the areas that it's not good. And what I think is in front of us is violating the first oath of medicine, which is the first thing is to do no harm. And that's not to deny a recognition that we have significant problems in terms of competitiveness and cost in our country.

But the thing that denies her access is cost, and when we spend way too much health care and we get not get enough value for the dollars that we're spending, to say we need to spend more money is the wrong answer. What we need is to get far greater value for the health care dollars that we're spending. And we need a compassionate response that is never going to work through a bureaucracy. And we're going to be able to take care of those that really need us.

But that's really a community obligation and not a federal government obligation. And we can do that, and we'll do it in Oklahoma, and do a pretty good job of it in Oklahoma.

VAN SUSTEREN: And I should probably point out for the one or two viewers who probably don't know -- I think probably everybody else does -- is that you are a medical doctor before you became a member of the U.S. Senate.

Last week, Senator, we took a little trip to Appleton, Wisconsin, my home town, and a hospital there has done some new coordination and they have reduced their costs 25 percent in a year, which is extraordinary. Are you telling me -- I mean, I don't know if this hospital is just an anomaly and the other ones (INAUDIBLE) but can we become more efficient to reduce the costs tremendously in this country without jeopardizing care?

COBURN: Yes, I think we can. Remember, we have a set-up system now where we don't pay for outcomes. What we pay is for procedures. And what we need to do is incentivize the care of the chronically ill. We need to incentivize the prevention so people won't become chronically ill. And if we do that, that's where the money is. We spend 75 percent of all our dollars on five chronic diseases. And what we ought to be about -- and we know it works because we've had several models that have done in the private sector, where they've absolutely cut costs or at least controlled them where they're not growing at all, over the last four to five years. And we all know who those are.

And so when we incentivize good behavior -- and I'm talking about actual incentives -- and we incentivize the management and care of chronic disease, what we know is the costs are going to fall. And you can -- you got 16 percent of our costs, Greta, that are associated with tort and defensive medicine. You got another -- and half -- that's 8 percent. And then 8 percent of our costs are transfer costs because of the lack of proper payments by both Medicare and Medicaid.

The other point I'd make is I'm still practicing as a U.S. senator. On many mornings, I practice medicine because it allows me to have the insight into the very real problems that we, as a country are facing in terms of health care.

VAN SUSTEREN: Why is it that when the Republican Party held -- held all the power in this city, the Republicans didn't take a run at health care?

COBURN: Well, a better question is why they didn't reduce the size and scope of the federal government when they had the run of the city. And that's why you're seeing the outcome. The thing that worries me the best - - and I'll answer your question in a minute.

The thing that worries me the most is that the president still believes that the reaction to the health care bill is contrived. It's not. There's very genuine concern in this country that, in fact, any government-run health care program and changes are going to add to the very high deficits that you've already outlined. You called it exploding. And in fact, everything that's been put on the table that we've seen, other than the bills that myself and several other Republicans have introduced, increases the cost of health care, rather than lowering it. And so we ought to be about lowering it.

Now, I don't know why the leadership -- I came to the Senate in 2005. I can't account for the five years before that. But the fact is, is they didn't take advantage of any of the opportunities they had to make big changes, and they could have done this and they should have, but they didn't.

VAN SUSTEREN: All right, to all those out there who might be critical of people who attend town hall meetings and get very passionate, let me ask you a question. I take it that in the United States Senate, you see lobbyists going up and down the hall on occasion, lobbying on health care. Do you see citizens? Do they have -- I take it -- they're not able to come to Washington and lobby like that, I take it.

COBURN: Oh, well, I disagree. You know, first of all, we pay a whole lot more attention to what we hear in the mail and the e-mails from our constituents than we do from lobbyists. And the reason for that is because they're the people that put you in the office and they're who you're to serve.

But the problem with health care is, is you have a dual obligation. You have to represent the interests of your constituency, but you also have to uphold your oath of office. And we are tapped out as a nation, and one of the reasons we're tapped out is the federal government's in areas that we were never intended to be.

And if you look at Medicare and Medicaid, both vital programs today, they're highly inefficient. People claim that they're efficient. Medicare has at least $80 billion worth of fraud a year. That's a full 20 percent of every dollar that's spent on Medicare goes to fraud. And Medicaid is not much better. We don't actually the numbers because half the states aren't reporting their Medicaid fraud.

So when you have programs that are designed to be defrauded, even though they're well intended and they are helping people, we ought to think about how do we get better value for that money and less money going out the door. And I think those are all solvable problems. What the president needs to do is to sit down and lead on the health care issue, rather than to speak something and then have bills that don't represent what he says he wants to do.

VAN SUSTEREN: Senator, thank you. Nice to talk to you.

COBURN: You're welcome, Greta. Good talking to you. God bless you.

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