This is a rush transcript from "Hannity," February 25, 2010. This copy may not be in its final form and may be updated.

SEAN HANNITY, HOST: Just a short time ago the White House health care summit came to an end in Washington. And tonight we'll have complete reaction to today's events from former Alaska Governor Sarah Palin, from Senator John McCain who attended the summit, and many others.

But first, here's what President Barack Obama had to say at the beginning of today's meeting:


PRESIDENT BARACK OBAMA: I'd like to make sure that this discussion is actually a discussion, and not just us trading talking points.

I hope that this isn't political theater, where we're just playing to the cameras and criticizing each other, but instead are actually trying to solve the problem.


HANNITY: But in the end, this eventually was political theater at its finest. And while some have hailed it as a rare moment of transparency in America politics, frankly, the only thing that was rare about today's event was that President Obama actually gave the Republicans a seat at the table.

But the GOP quickly found that the so-called summit wasn't a venue where dissent was permitted.

Now take a look at this exchange between President Obama and Tennessee Senator Lamar Alexander.


OBAMA: Lamar, when you mentioned earlier that you said premiums go up, that's just not the case according to the Congressional Budget Office.

SENATOR LAMAR ALEXANDER, R-TENN.: Mr. President — if you're going to contradict me I ought to have a chance to — the Congressional Budget Office report says that premiums will rise in the individual market as a result of the Senate bill.

OBAMA: No, no, no, no. Let me — and this is — this is an example of where we got to get our facts straight.

ALEXANDER: That's my point.

OBAMA: Well, exactly. So let me — let me respond to what you just said.


HANNITY: Wow. Now speaking of facts, Senate majority leader Harry Reid wasn't exactly in command of them. Now here's what he had to say about the possibility of using reconciliation or the nuclear option to ram this bill through Congress.


SENATE MAJORITY LEADER HARRY REID , D-NEV.: You're entitled to your opinion but not your own facts. No one has said — I read what the president has on, no one has talked about reconciliation, but that's what you folks have talked about ever since that came out, as if it's something that has never been done before.


HANNITY: Now apparently Senator Reid is working with his own set of facts because he's the one who's been floating the idea of using reconciliation for weeks. Let's take a look.


JON RALSTON, HOST, "FACE TO FACE": You keep talking about if there might be reconciliation. You cannot get health care reform passed without doing reconciliation.

REID: Yes.

RALSTON: Just say it right here.

REID: But, Jon, look. Listen. Reconciliation can be used for different purposes. We can write a whole new bill, OK? Or we can use reconciliation to pass the bill we've already passed.


HANNITY: And joining me now with reaction to today's health care summit is former Alaska governor, Fox News contributor, Sarah Palin.

• Watch Sean's interview

Governor, looks like a winter wonderland. How cold is it there?

SARAH PALIN, FOX NEWS CONTRIBUTOR: It's about 20 degrees. But it feels beautiful to us. And yes, isn't it gorgeous and clean and healthy? It's why we're outdoors so often, Sean.

HANNITY: Well, I can tell you that without a jacket, I give you a lot of credit.

All right. Let me get your first general impression. We have a little bit of a delay here. Your general impressions about the summit?

PALIN: I think Michele Bachmann summed it up very well earlier today. She suggested that maybe the beer summit was more productive and fruitful than what we saw today coming out of the health care summit.

Maybe these guys should have popped some tops off some MGDs and got really down to business and gotten the work done. Because what we saw was a lot of political posturing had been, I guess, feared and that did come to fruition. A lot of posturing.

I think the president kind of slid from the professor at the lectern mode and slid right on into the moderator at a meeting mode. A not a whole lot of passion for meeting the challenges that are brought to light when he talks about his proposal to reform or take over health care really.

So I don't think a lot of success came out of this in speaking on the president's behalf. But for the Republicans, again with their free market, pro-traditionally American, free market principles that they want to see applied in solutions to health care challenges, I think that they did a great job.

HANNITY: Well, go into more specificity, a little bit more detail, if you can, Governor, about how the Republicans did today. We have Senator McCain is going to join us in a few minutes. They had that pretty fiery exchange.

Lamar Alexander, Eric Cantor, you know, Paul Ryan, I thought very interesting. I think this is the first time the American people got to see the Republicans' side. You're reaction to them in general.

PALIN: Well, exactly. See, the Republicans have been asking for an ear in the White House to hear what their proposals have been. Their proposals have been online, their solutions that they want to offer, and yet they've been accused of being the party of no and the party of not having any solutions.

Today was an opportunity for them to show what they had been talking about all along and so again that was a victory on behalf of Republicans to finally be able to express what some of these free market, patient-oriented solutions are that they want to see implemented incrementally.

Not comprehensively, but incrementally the broad-based support on some of these measures so that we can start meeting the challenges in health care. I think some of the details that we didn't hear a whole lot about coming from the president and the bill that he is supportive of had to do with like price controls, which of course will manipulate and distort America's traditionally free market way of doing business in our economy.

And the price controls and other things we'll hear more about in days to come. And in that sense, Sean, this was a very, very productive day. It was painful to sit there and watch this, but very productive and helpful and healthful for Americans to see what had been discussed all along now out in the open.

And now Americans can start asking more questions, hopefully getting more answers for two things like the price controls.

HANNITY: When the — when the Republicans brought up the issues of process, how corrupt this has been, inasmuch as you had to bribe individual senators, and certain states got certain benefits that other states wouldn't get.

The idea that he wouldn't take reconciliation off the table, the president got very combative. He seemed — from my point of view — angry at times. Did you get that sense when he was lashing out saying these are talking points. Your facts are wrong. What did you think?

PALIN: Yes, and not answering those challenges to what he is proposing when it comes to reconciliation and other things right out of the chute when he was asked about those, and then he refused to answer those questions. Just kind of punted and went on at a different angle and to different speakers.

I think that was frustrating for participants. Certainly frustrating for Americans who are sitting here, watching and trying to figure out what the answers are. And if the process will include reconciliation.

Harry Reid blew me away when he said no, nobody is even talking about reconciliation. Well, yes, Mr. Reid, people are talking about reconciliation in your own party. That's how many believe that they, you, Harry Reid, are going to cram this thing down America's throat and we don't like it.

HANNITY: What do you think the political fallout is? And interestingly, Harry Reid himself, as we just played, he's been using the term reconciliation. He's been pushing for this. But from a political — purely political standpoint, if the Democrats can, in fact, go back and they use the reconciliation process, what is the net impact of that on them politically in light of the country being pretty angry right now?

PALIN: You know, that's a two-edged sword when we talk about what could happen, what could be a fall out, or ramification if they did cram through via reconciliation — this scheme, this government growth takeover of too many aspects of our health care.

Double-edged sword is that politically this would be good for common sense conservatives who want to get elected and clean house in there because Americans would be so outraged that Congress will have done this to the American people.

But we have to ask ourselves, is that worth it, though, to be able to get in there politically, clean house, get new people elected? Is it worth it? Because the risk is this 1/6 of our economy being so controlled and 1/6 of our society being so controlled by government with this takeover of health care.

Is it worth it? That's the story. That's the two edges that we have to consider.

HANNITY: The Wall Street Journal had an article today that Obama readies a fall-back proposal. He was asked at one point — and the Fox News cameras picked this up today — if he has a plan B? He said yes.

Is this an admission, do you think on their part that they don't think that they can get this through? Are we going to look at February 25th, at Blair House as the day that health care died in America?

PALIN: Yes, the cameras did catch our president speaking to that, that plan B he said yes, I always have plans. You know, it makes you wonder, what is up his sleeve? What is up Congress' sleeve? Is there a plan B as some reporters are now revealing to the American public that there probably is one?

A bit frustrating, too, I think, for a lot of viewers to not have had that question answered, especially when it was intimated early this morning that yes, there probably is a plan B to get this thing through anyway.

HANNITY: All right, Governor. Stay right there. We're going to come back.


HANNITY: And we continue now with our coverage of the White House health care summit with former Alaska governor, Fox News contributor, Sarah Palin.

Governor, we've all chronicled the fact that the Republican Party alienated a significant portion of their conservative base. So my question to you is, do you think today went a long way perhaps reassuring that base that they are back to their conservative values?

PALIN: I really think so. I think today was a good day in that respect. The free markets enterprises that have built this great country into the most healthiest, safest, most prosperous and voluntarily generous country in the world is based on the things that the Republicans were talking about today.

They were talking about more choices and more priorities being allowed to be given by our small businesses and our families. Those things again that built our great country. They got to articulate their principles, their values today as opposed to what government, via the White House and the president and the Democrats, were trying to convince Americans were the answers to the challenges that were faced today.

Their answers are hey, government is going to take care of you. But we need to grow and we need to tax you more. We need more control and to take more of your freedoms and choices away from you. But that's the answer to the — to the challenges we're facing.

No, this was again a very helpful thing to get to witness today. You saw fundamentally opposed viewpoints on how to meet the challenges in America today.

HANNITY: Reagan used the term — in CPAC 1974, no pale pastels but bold differences. And I've been urging Republicans make those differences clear. One of the issues that has come up is the issue of third party candidates, the Tea Party movement running candidates.

You have said — you think that's a bad idea. Can you explain in specificity why?

PALIN: Well, you know, Reagan also said there are no easy answers, but there are simple answers. Now a simple answer to a challenge that we face today with the Tea Party movement and I believe that I'm a part of that, because I'm such a believer in freedom, and that's what the Tea Party is all about.

A simple answer to the challenges that they face and not knowing kind of where we belong right now is to essentially pick a party because we are a two-party system and it's a heck of lot easier in to get in there and reform one of the parties, and get the people in the party to understand what has built this great country and what will allow for a brighter future for this great country. Than it is to form a whole new machine and a whole new process via a third party.

Let's just get in there and take over one of the parties. Take over the Republican Party, Tea Partiers, and get them to see the light. They are seeing the light clear and clearer everyday.

But get them to understand what it is that built this country. Get back to the foundation of America. Build upon that and we will be a safer, healthier, more prosperous nation.

HANNITY: Well, it's interesting. It's a very similar to what you're saying what Reagan said. And he said a new Republican Party, a revitalized Republican Party on conservative principles.

But we're heading into what I think is one of the most important midterm elections in our lifetime. So if there are any specific issues — I know you're going to be out campaigning around the country for a lot of candidates.

If there's any specific issues that you think the Republican Party ought to be embracing, to bring the Tea Party movement, to bring conservatives and maybe Blue Dog Democrats to the movement, what do you think those issues are?

PALIN: Again, it's pretty simple when it comes down to what it is that America was built upon. It's a smaller, smarter government, not growing government to control more of our lives and our businesses and make decisions for us.

No, it's innovation, it's reward for a tough, hard work ethic that is embraced by so many Americans. Now if candidates get it and can understand that that, building upon that will build a greater nation, then I'm going to be out there supporting those candies.

And national security, like Reagan used to say, too, hey, bottom line, we win, you lose. If a candidate can understand that we need a strong national military presence, so that we can have a more peaceful world, then I'm going to be supporting those candidates, too.

It really is not as complicated as some in Washington, D.C. want to make it out to be.

HANNITY: So if you — if I can break this down, so if you're the party of fiscal responsibility, balanced budgets, eliminate earmarks, the party of a strong national defense, I'm looking behind you. I know there's a lot of oil out there somewhere behind you. Free market solutions for health care, free market solutions for education, simple things.

I agree with you. If candidates run on those simple things, is it going to —

PALIN: Yes, simple things.

HANNITY: It's victory?

PALIN: It's victory if candidates will embrace smaller, smarter government, energy independence, strong national security. Hey, remember those talking points that I had written on my hand a couple of weeks ago at the Tea Party movement?



PALIN: Because I had done seven speeches in four days and I'm running up to the podium and — you know, writing on my hands, oh that's a poor man's version of a teleprompter.

I write on my hand, energy, tax cuts, lifting American spirits. Those are the things that candidates need to embrace in order to get elected and get this country back on the right track. It's quite simple. It is exactly all those points that you just articulated, Sean.

HANNITY: All right, last question. Net winners, net losers. Did the president hurt himself today? Did the Republicans help themselves today in terms of public perception?

PALIN: The Republicans helped themselves, absolutely. They got to talk about the patient-centered, free market oriented solutions to health care reform that is needed. We do need to reform much of our health care that we have in America. But they were able to articulate that, whereas the Democrats, the president, it was just more of the same old, same old. It was a whole lot of lecturing again.

HANNITY: All right, Governor, I love the winter wonderland behind you. I think it looks terrific. I know it's 20 degrees and you don't even have a jacket on. That's pretty tough. I like that. We appreciate you being with us and thank you for joining us.

PALIN: Hey, thanks so much. Any time, Sean.

HANNITY: All right. And thank you, Governor.

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