we're talking about potential weapons being used against guam. >> north korea issuing another threat after mocking president trump's fire and fury warning. >> we have two school yard bullies trying to play i've got a bigger gun than you've got. >> sending a message in language that kim jong-un will understand. >> ego mania taking place on both sides. >> we've failed for 30 years. time to try something new. we learned the fbi raided paul manafort's home last month,

confiscating materials for the special counsel's investigation. >> they're not going to let people sit back and stall the investigation. >> this means mueller's team believes crimes took place. >> this is a big deal. >> this is "new day" with chris cuomo and alisyn camerota. >> good morning everyone. welcome to your "new day." north korea appears to have crossed president trump's red line with a new threat in which the north is outlining a specific plan to fire ballistic missiles into the water near guam. the general in charge of north korea's missile program slamming president trump as be rest of reason. he dismisses president trump's fire and fury warning as nonsense. >> the trump administration giving somewhat mixed messages, certainly tiered language, using language, fire and fewer, the likes of which the world has never seen. then you're hearing from the state department and other officials that americans can sleep at night despite these rising nuclear tensions.

what will we hear from the white house today? we have it all covered. we have the global resources of cnn in effect. let's begin with cnn's will ripley live in beijing. what are you hearing, will? >> reporter: chris, we know north korea is essentially insulting the president saying they don't take him seriously, calling his fire and fury remarks a load of nonsense, also saying he fails to grasp the severity of the situation on the peninsula. they have detailed a technical plan that they say they could pull off potentially in a matter of days to launch four intermediate-range missiles from the korean peninsula, 2,100 miles to the island of guam, home to more than 160,000 american citizens. they san jose they will launch what has a range to be at least 2300 miles. it could reach the island in less than 20 minutes. those missiles would potentially come down, north korea says, less than 20 miles from the

island. of course, with questions about the accuracy of north korean missiles, there is serious concern about safety if there were to be an overshot, for example. north korea seems confident they can pull off a test like this. this is a quote from general kim, he says about president trump, sound dialogue is not possible with such a guy be rest of reason and only absolute force can work on him. north korea trying to show force by staging a massive anti u.s. rally in kim il-sung square in the center of pyongyang, a place i visited many times. hundreds of thousands attending this military rally chanting anti u.s. slogans and speaking out against the united states and president trump. >> will, thank you very much for that information. north korea says it has a plan to launch missiles near guam within days as the pentagon

prepares for a preventive attack involving launching b-1b bombers from andersen air force base. ivan watson is live in guam with more. what have you learned, ivan? >> reporter: alisyn, the governor of guam, eddy calvo, i spoke with him at length. he says there's been no raising of the threat level here for this u.s. island despite these threats coming from pyongyang. he pointed out for missiles to reach here from north korea, they would have to pass through an umbrella of defense and security architecture that includes the u.s. and the south korean military and then the japanese defense forces and the u.s. military stationed on japan before reaching guam itself, which is also protected by several american military installations as well as the thaad missile defense system which was deployed here after 2013 when the north koreans made

a previous threat against this american island. he is insisting that there is ample defense mechanisms in place here and there is no need to panic. we're not seeing any signs of panic on the streets or the beaches of guam where i watched people and tourists snorkeling today. there is some increased concern, however. one mother i spoke with of two young children, she said she has had to inform her 6 and 8-year-olds to be prepared in the event of a drill or a real life scenario. >> ivan, scary business, thank you very much. white house officials sending mixed messages, different messages, describe it the way you like. the president and his defense secretary did send warnings to pyongyang. the secretary of state says diplomacy will prevail. cnn's barbara starr live at the pentagon with more. i know this has gotten tons of headlines, but fire and fury versus americans can sleep safe

at night is going to create a little bit of confusion. >> reporter: i think that's definitely the case, chris. administration officials pushing back saying there are no mixed messages, people have different voices about the same issue. but make no mistake, that words do matter here, and if you look at the words of president trump and the secretary of state, rex tillerson, you might come to your own conclusion. haven't a listen. >> north korea best not make anymore threats to the united states. they will be met with fire and fury like the world has never seen. >> i think americans should sleep well at night, have no concerns about this particular rhetoric of the last few days. >> so, the secretary of state clearly speaking of the rhetoric of the last few days, hard to see what he means other than the

president's rhetoric. secretary of defense james mattis also weighing in, he says the dprk must choose to stop isolating itself and stand down its pursuit of nuclear weapons. the dprk should cease any consideration of actions that would lead to the end of its regime and the destruction of its people. again, words matter. very tough words from the defense secretary. now, the white house press secretary sarah huckabee sanders says the president's statement, fire and fury, were his own words. alisyn, chris. >> barbara, appreciate it. thank you very much. let's bring in the panel. cnn political analyst john avlon, cnn military and diplomatic analyst, rear admiral john kirby and "washington post" report reporter karen lennon. >> the administration does what it does with this president, trying to contain this president

after he freelanced this comment and spoke casually about nuclear war. it was not coordinated with the national security council. this is an escalating situation. when you've got north korea saying someone without reason, the escalation continues. this problem is not going to be solved. it wasn't helped yesterday by the president. >> john kirby, we hear from secretary of state rex tillerson americans should sleep well at night. we heard from ivan watson that there seems to be no panic on guam, people are still going to the beaches. is this just rhetoric ratcheting up, or is something else happening. >> i think it started as rhetoric ratcheting up and now has become a much more tangible threat by the north koreans. i've been involved in defense issues for a long time. i've never seen a statement out of pyongyang like the one we saw yesterday. i'm not saying we all need to dig bunkers in the back yard and i think having a sense of calm is a good thing.

but that was a very specific threat that i think obviously the national security establishment is going to have to take seriously. i think john ave. lodge had it right. this is the equivalent of the president jumping off the high dive and now everybody is scrambling to build a swimming pool, trying to come together and put context behind what he said. that's why secretary tillerson was trying to calm everybody down and why mattis was saying we've got to be ready. >> not the irs if time we've seen a one-two punch. we've been playing with the irony of the president, fire and fury, sounds like sound and fury froo the shakespeare quote which says often it signifies nothing. often this can happen with this hot talk. officials take it back down, that's not that unusual. >> well, it is pretty unusual because our country is expected to speak in a certain way with both its enemies and allies. that's usually in a pretty calm,

diplomatic voice. but this president has shown a predilection for tough talk. he values tough talk actually. the difference is this isn't like the new jersey casino world or the new york real estate world. this is him as the voice of both american military and the american state department. he loves it when you dice it up and punch around. >> remember the heat george w. bush took for saying in the wake of 9/11, he wanted bin laden dead or alive, gunslinger terms. if you try to do the other historical parallel and say it's richard nixon's mad men theory and he's trying to move that ball forward, i think that's trying to enforce structure,

order and reason where there isn't any. >> the president is tired of our discussion of north korea this morning. he's injected a different topic, another battle to discuss. can you believe that mitch mcconnell who has screamed repeal and replace for seven years, couldn't get it done, must repeal and replace obamacare. carol, when your hear those kinds of words -- again, not the sharpest language we've heard from the president, but taking on one of his own, that he needs, he needs this man to deliver for him? your take on the strategy? >> well, it's hard to compute how many people the president has said were great allies and friends and then publicly repudiated or humiliated. >> we have only seen the second part of that personally. we cannot speak to the first pa past. >> i think it's really striking. you have, for example, jeff

sessions, one of the first and only senators who stood with donald trump when he was running for president, and what does he get for his loyalty but some public humiliation over and over again in these tweets. what does mitch mcconnell get for trying to deliver something -- >> but he didn't deliver. fair point, he didn't deliver. the president inherited this promise of repeal and replace. >> he campaigned on it as hard as anybody and he showed zero presidential leadership in trying to actually stay focused on that agenda. the weeks they were focused on health care, he's busy tweeting about other subjects and stepping on his own message. there's culpability of the president. the senate is on break, folks. donald trump can be tweeting about the health care bill from bedminster, it's dumb to pick a fight with mitch mcconnell but it's got little to do with reality which unfortunately seems to be escalation. >> did you say radioactive

squirrels? >> yes, i did. thank you very much. >> john kirby, to that point, why isn't the white house -- single mindedly focused on north korea given what appears to be ratcheting of tension? >> i do think that his national security team has been rightly focused on this. of all the national security issues this administration has dealt with, i believe they've handled the north korea one with the most careful, thoughtful and deliberative approach, aside from the president's rhetoric and where he seems to be going on this. i think the team is rightfully focused on this. i'm not worried about that. any white house has to be able to do more than one thing at a time and clearly handle domestic issues as well. i'm not too concerned about that. i do think secretary tillerson, mattis, ambassador haley, general mcmaster, they're focused on this like they need to be. >> carol, you broke the big news about former campaign chairman

paul manafort, the fbi raid at his home. tell us about what the fbi was looking for. do we know if he wasn't being forthcoming somehow in turning over documents? >> what we know so far is it's a wide ranging request, that's what a search warrant is, whatever i want, whatever i see i can take. what we know about what they sought were both banking and personal tax records, but also a series of documents that are alleged to be attorney-client privilege documents involving his preparation for speaking to congress and answering their questions about allege ld russian collusion with the trump campaign. you'll remember paul manafort was the chairman of trump's campaign for a period of time, until there was a lot of embarrassment about his lucrative career lobbying for a

pro du pro-russia, ukrainian party and the failure to report those proceeds and receipts. >> and trump's outrage about what happened with melania's speech. don't forget about that at the convention when they wound up throwing melania under the bus when that speech writer lifted some of the language from michelle obama. that was a problem, also. what does the report reveal, carol, in terms of the intentionality by the special counsel here? is this because manafort wasn't cooperating? is this because they believed he might not cooperate? was this just a show of force? >> so it could have very well been just a show of force, like we're not kidding around, mr. man fort. we are looking at you for potential crimes. you have to convince a judge that indeed there is probable cause to believe a crime is committed. in this one, there's a decent amount of evidence of a potential crime, failure to report, false statements, documents and tax liability,

lots of liability there. but whether or not mueller thinks that man fonafort was go to cooperate with a subpoena, it's unclear. what we do know is a judge was convinced there was fear about whether or not these records would be turned over voluntarily. >> carol, thanks so much for sharing your reporting with us this morning. john kirby and john avlon, thank you very much. why did senator ron johnson suggest john mccain's brain cancer possibly affected his decisive no vote on obamacare's repeal. did he really mean it the way it's being interpreted? the senator is here. he's going to talk about that. we're going to talk about north korea and then he has brought his charts to explain to you the businessman's perspective on how to fix health care. all that coming up.

i'm worried i can't find a safe used car. you could start your search at the all-new carfax.com that might help. show me the carfax? now the car you want and the history you need are easy to find. show me used minivans with no reported accidents. boom. love it. [struggles] show me the carfax. start your used car search and get free carfax reports at the all-new carfax.com.

senator ron johnson says he was taken out of context, but he's certainly under fire for comments about senator john mccain's no vote on health care. here is a part of the discussion in question. >> we did get a call in paul, he

assured us that skinny repeal not going to pass the house, it would have to go to conference. i'm not going to speak for john mccain. he has a brain tumor right now. that vote occurred at 1:30 in the morning. some of that might have affected him. i don't know exactly what -- we really thought and again, that conference at 10:30 at night. by about 1:00, 1:30, voted no. i'm not going to say what was on his mind. >> mccain's office responded that it's unfortunate he would question the judgment of a colleague and friend. we have senator ron johnson of wisconsin with us now. here is the chairman of the homeland security committee, also a businessman most of your adult life. we're going to spend a different segment on this show going through the schematics you put

together, charts to show people what has to be done on health care. i know you want to clear this up. you are known as a gentleman in the senate. what did you mean about john mccain. >> first of all, i have the deepest respect for john mccain. in no way was i trying to criticize him. if anything, i was trying to defend his position. a lot of us had a real problem with that skinny repeal, and we weren't going to vote for it until we got that assurance from paul. listen, i was trying to defend his position and truthfully express my sympathy for his health condition. again, i reached out to john, i'm hoping the talk to him to y today. i have the greatest respect for john mccain. >> do you believe he's on his game, his cancer should be an issue? >> no. absolutely. we held a press conference. i was just expressing sympathy for his condition.

again, no, i've got the greatest respect for john mccain. he's not impaired in any way, shape or form. >> all right. that's done. now, someone who says they want to own every bit of what they're saying is the president of the united states with the leader of the snenate, mitch mcconnell. he's putting the lack of health care on you guys. you have been swearing you'd repeal and replace it. mcconnell says it's unreasonable expectation. the president disagrees and is saying he should have gotten this done. what do you make of the president calling out the majority leader? >> we should have gotten this done. the ball was in our court. >> fair point. >> president trump is at his desk with a pen ready to sign what coming was ready to send him and we didn't. the fact of the matter is

obamacare is a mess, that's not going away and we have responsibility to do everything we can to fix that. >> remember, senator johnson is not just saying it, this isn't hype. we have charts we'll go over in a second. let's talk about the political play. you go after mcconnell as the president of the united states in public, on twitter, whatever, people see it. you need him to motivate the agenda. is this the right tactic in your opinion? >> i'll let this president speak for himself and his tactics. the fact of the matter is we need to come up with the policies to reduce premiums. that's what we'll be talking about. we need to be honest in terms of what the root cause analysis is. that's in the lap of congress, in the lap of the house and the senate. obviously we need as much help and support from the administration as well as we're doing this. also when it comes to health care, governors. i've been working with scott walker and a grum of governors, working on the lindsey graham

grant to the states. those busting it, working 60 hours a week, seeing premiums double, coverage cut in half. we've got to address that root cause and make sure those men and women aren't forgotten. >> let's talk about something else that's on the table today. north korea. the president's words, fire and fury. then you heard something different from the secretary of state, seeming to take the temperature there. this could be interpreted two ways. one is this is good cop, bad cop, a one-two punch. the other is this is an inconsistent message, the president was freelancing again and caught his white house off guard on something that really matters. your take? >> first of all, i don't think the statements are inconsistent. what secretary tillerson is saying north korea cannot threaten america. they're rapidly approaching that point where they could. for decades on a bipartisan basis, presidents, members of

congress have been saying it's unacceptable that north korea has nuclear weapons or ballistic missile technology. they're approaching the point where they can deliver that to america. everyone is saying that is unacceptable. diplomatic speech hasn't worked. you have a president who is saying we're in the going to put up with it. the end of patient strategy, strategic patience is over. i would advise north korea, china, russia, anybody that has influence that supports north korea to pay attention to what this president is saying. we are not going to allow north korea to get in that position where they actually could threaten america. >> saying i will bring the fire and fury, the likes of which the world has never seen, when you're talking about somebody who may very well have a nuclear arsenal sounds to suggest like you're about to go to war. that's different than saying it's unacceptable, we're going to find ways to shut it down. >> where there's an eminent

threat or they launch something, what should we do? what do we expect the american president to do, other than bring down the fire and fury. >> you're willing to support military action against north korea? >> if they are threatening us and they start launching at our territories, what else are we going to do? sit back and take it? no. that's why we have a military. again, what we need to do, we need to pressure, because china has not had obviously, has not responded to what pressure has been brought to bear in the past. they've got to stop their testing of ballistic missiles, i think what president trump is doing is sending a signal not only to north korea but also the people around the leader as well as china and russia. they have got to pay attention to this president. look what he did with syria. he didn't fool around. he responded immediately. i think that hopefully made a real impression on the chinese

president. >> well, we'll see where the words leave us. you will stay, please, senator. we're going to get much deeper into the case to the american people about what the senator believes you should do to fix obamacare and change the system. stay with us for that. alisyn? >> chris, how can the escalating conflict with north korea be defused? two generals share their ideas next. rethink what's possible. rethink your allergy pills. flonase sensimist allergy relief helps block 6 key inflammatory substances with a gentle mist. most allergy pills only block one. and 6 is greater than one. flonase sensimist. ♪

♪ i'm living that yacht life, life, life ♪ ♪ top speed fifty knots life on the caribbean seas ♪ ♪ it's a champagne and models potpourri ♪ ♪ on my yacht made of cuban mahogany, ♪ ♪ gany, gany, gany, gany

♪ watch this don't get mad (bell mnemonic) get e*trade and get invested mikboth served in the navy.s, i do outrank my husband, not just being in the military, but at home. she thinks she's the boss. she only had me by one grade. we bought our first home together in 2010. his family had used another insurance product but i was like well i've had usaa for a while, why don't we call and check the rates? it was an instant savings and i should've changed a long time ago. there's no point in looking elsewhere really. we're the tenneys and we're usaa members for life. usaa. get your insurance quote today. can this much love be cleaned by a little bit of dawn ultra? oh yeah one bottle has the grease cleaning power of three bottles of this other liquid. a drop of dawn and grease is gone.

the tension with north korea seems to be escalating by the day. north korea says it has a specific plan to fire several ballistic missiles into the waters near guam. somehow should the u.s. respond? let's discuss with general wesley clark and retired u.s. army brigadier general anthony tata, author of the book "besieged." thank you very much for being here. we need your expertise this morning. north korea has gone beyond rhetoric in that they have produced actual papers of an outline, a plan to fire these several intermediate ballistic

missiles into the waters near guam. general clark, how should the u.s. respond? >> i think we need to have direct private talks with north korea. i think the united states, secretary of state or distinguished emissary should go over there and talk directly with the north korea leader. it's possible north korea could send out a notice to airmen and mariners, a notam and this could be done safely. this is ratcheting up this escalation that makes this extremely dangerous. we have to step back from this immediate challenge right now and ask ourselves, what's the real objective here? do we really think north korea is going to give up its nuclear capabilities and its missiles because we threaten it? they consider that essential to regime survival. do we think that, if we put them in a position where it's use it or lose it, that they won't

really think about using it because it's about regime survival. >> i'm sorry to interrupt, but does that mean -- are you saying you would be comfortable living with a nuclear north korea, that we should just get used to them having nuclear weapons? >> i say we better think about that really hard before we back them into a corner where they feel like they're going to be destroyed by us if they don't use nuclear weapons. so when we say it's intolerable, what are we willing to do? here would be one way to deal with it. say it's intolerable, fine, leave the korean peninsula, turn it over to us and you won't have to worry about it. once you leave, then we promise we'll get rid of our nuclear weapons. would we accept that? i don't think so. so we have to know what our objective is. we have to speak very directly and very, in very measured,

deliberate ways. >> general tata, what are your thoughts? >> alisyn, i think the president has been very clear. i think secretary mattis has been very direct, and i think secretary tillerson has been very diplomatic. it is unacceptable for this regime, which president bush called a member of the axis of evil with iran and iraq, and what you've got now is the capability, because of the passivity of the past and kicking the can down the road, this, quote, unquote, strategic patience. president obama so an anesthetized the united states population into believing there were no threats, no threats from isis, from islamic extremism, from north korea. now all of a sudden we have intercontinental ballistic missiles, we have miniaturized warheads that can be put on those missiles that can range chicago and denver. i think what you do is continue

the synchronization of elements of power, and that's what you're seeing this administration do, is deliberately synchronize economic elements of power. they've got a unanimous vote from the u.n. to begin to squeeze north carolina, cutting by 25% their exports and then you begin to leverage russia and china. china is the key here. >> which hasn't worked so far. >> well, we're six, seven months into this thing, whereas president obama ignored it for eight years. so now what we've got to do is bring this thing to a head because it's unacceptable for north korea to have nuclear weapons that can range the united states. it's unacceptable. so we've got to have a -- work toward a solution, and i think the information elements of power that are play here, the economic, the diplomatic, the political and, of course, the

military, and we're flying the b-1 bombers, showing flexible deterrent options that i know general clark knows about. we're doing all that right now. >> you think that will make north korea and kim jong-un stand down? >> president trump offered to talk to kim jong-un, he said under the right circumstances, i'm happy to sit down and talk. this is not what north korea wants. what they want is to continue to have the world stage and they want this attention. of course, china is feeding into this, and they're being duplis us to about it, of course. so that is part of the three dimensional chess we're playing here. >> general clark, if they do fire theintermediate missiles, could that just be chalked up to another test? >> i think that has to be worked very carefully inside the interagency and brought up to

the president as to what we do about that. i think it starts with direct dialogue, private dialogue with the leader of north korea. when we were engaged in this in 1994, president clinton sent president carter over there and we headed off a nuclear crisis. in 2002 when the administration realized that the north koreans actually were moving toward a separate path forgetting nuclear weapons, the bush administration continued to focus on iraq, and had they been really determined to stop proliferation of nuclear weapons, it wouldn't have been an invasion of iraq. it would have been serious concentration on north korea. that wasn't done then. >> i understand. >> we've worked steadily on anti proliferation. this is no surprise. this has come for a long time. we have to think what our objective is here, to simply say it's impermissible, that's fine for public talk. when you get into it privately

with north korea and say what are the military options, there are no cost-free military options, and we shouldn't make ourselves believe that there are. this is not a matter of snapping your fingers and saying i'll turn the military loose and they'll fix it. that's not the case here. >> gentlemen, we're out of time. but what i hear you both saying is, of course, blaming some of the predecessors forgetting us into this mess, but also that you both favor some sort of direct talks, and that's interesting. and we'll see whose names rise to the fore for that. thank you, both, for being here. we're following this mystery unfolding in cuba, a bizarre attack that's left two american diplomatic staff with hearing loss and concussion-like symptoms. we have a live report from havana on this acoustic attack.

we send our kids out into the world, full of hope. and we don't want something like meningitis b getting in their way. meningococcal group b disease, or meningitis b, is real. bexsero is a vaccine to help prevent meningitis b in 10 to 25 year olds. even if meningitis b is uncommon, that's not a chance we're willing to take. meningitis b is different from the meningitis most teens were probably vaccinated against when younger. we're getting the word out against meningitis b. our teens are getting bexsero. bexsero should not be given if you had a severe allergic reaction after a previous dose. most common side effects are pain, redness or hardness at the injection site; muscle pain; fatigue; headache; nausea; and joint pain. bexsero may not protect all individuals. tell your healthcare professional if you're pregnant or if you have received any other meningitis b vaccines. ask your healthcare professional about the risks and benefits of bexsero and if vaccination with bexsero

is right for your teen. moms, we can't wait. ♪ hey, is this our turn? honey...our turn? yeah, we go left right here. (woman vo) great adventures are still out there. we'll find them in our subaru outback. (avo) love. it's what makes a subaru, a subaru. get 0% apr financing for 63 months on all new 2017 subaru outback models. now through august 31. stay with me, mr. parker. when a critical patient is far from the hospital, the hospital must come to the patient. stay with me, mr. parker. the at&t network is helping first responders connect with medical teams in near real time... stay with me, mr. parker. ...saving time when it matters most. stay with me, mrs. parker.

that's the power of and. that's why at comcast we're continuing to make4/7. our services more reliable than ever.

like technology that can update itself. an advanced fiber-network infrustructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. there's this mystery unfolding at the u.s. embassy in havana. the state department believes several diplomatic staff members were targeted by a covert acoustic attack that left them with hearing loss and concussion-like symptoms. cnn's patrick oppmann, our man in havana, cuba, with the story. patrick, good to see you as always, first of all, help us understand what is an acoustic

attack? >> reporter: absolutely, chris. it sounds like a mystery straight out of a spy novel. it's called an acoustic attack, but the diplomats probably weren't even aware of it. it's not something you can hear. such high-level frequencies that they're not audible and used a lot of times by spies to soak up information, hear conversations, essentially eavesdrop. but in this case what appears to have happened is that they can be very powerful frequencies and cause concussion-like symptoms. one diplomat apparently has permanent hearing loss. about a half dozen u.s. diplomats got very, very ill as a result of this. the u.s. expressed displeasure with this, saying knock this off, leave our people alone and may expel two cuban diplomats to essentially tell the cubans that they're sending a shot straight

across the bow. so this is something that for months these two governments have been talking about. cuba has been denying it but now is becoming a full-fledged diplomatic incident. >> patrick, thank you for trying to explain this very peculiar story. meanwhile, time for "cnn money now." the tensions with north korea, is that the only reason the market is dropping? cnn christine romans is in the money center with more. what are you see? >> wall street finishing lower for two days in a row in response to the mounting tension between u.s. and north korea. for months stocks have coasted to record highs, slugging off geopolitical concerns. this news has investors showing signs of caution. when you look at gold, up 1%, a two-month high there. the fear gauge, something called the vix is up 21%. the u.s. dollar is down 8% this year. north korea isn't the only catalyst for this little drop

we've seen on wall street. some of it is due to disney shares. they fell after pulling out of a deal with netflix, and there were a few disappointing earnings reports. profits are strongly seasoned and all three major stock market averages are still up by double digits this year. defense stocks, by the way, profited greatly from president trump's tough rhetoric, by the way. shares of lockheed martin and raytheon hit record highs. >> christine, thank you very much. senator ron johnson says obamacare needs to be repealed and replaced. the big question is how, how do we make it better? he's a businessman. he says he has done the math. he has charts to show you what the problem is and how to fix it next.

[ gasps, laughs ] you ever feel like... cliché foil characters scheming against a top insurer for no reason? nah. so, why don't we like flo? she has the name your price tool, and we want it. but why? why don't we actually do any work? why do you only own one suit? it's just the way it is, underdeveloped office character. you're right. thanks, bill. no, you're bill. i'm tom. you know what? no one cares.

. so senator ron johnson thinks to get to a consensus on health care, the country needs to start talking about how it tul works. what the details are. i know, it sounds like broccoli, i don't want to do the homework. too bad. this stuff matters. and we asked him, come on, bring on your math. bring on your charts, and let's have a real discussion about how the senator believes you could repeal and replace baobama care and make it better for people like you. senator, thank you very much. let's get through some of your big points. >> so this is the morning broccoli here, huh? let's start with just the basic fact of what our health care system is. we spend $3.2 trillion. the largest percentage is in hospitals, doctors and clinics, home care nursing. that's about two-thirds of what we spend. insurance, administration and drugs is about 20%. and the point i'm trying to make here, because i hear it all of the time, if you just get rid of the profits from drugs and insurance companies, you'll solve the problem. well, we've done a pretty good

job at estimating this. we think it's about $135 billion out of the $3.2 trillion, 4.2%. so you take away the motivation of innovating from drug companies, not have new drugs and still not solve our health care problem. >> also, you can't take profits out of -- >> no -- >> a capitalist society. >> i don't think you should. i just want to dispel the myth that our problem isn't profits and drug companies and insurance companies. the problem lies in inefficient delivery system, fueled by the fact that, you know, people really aren't paying for it. but we'll get that in the next chart. let's just take a look at how basically people get insurance. the vast majority of people are employer-sponsored group policies. largely unaffected for the time being by obamacare. but, again, obamacare is primarily medicaid, medicare expansion for able-bodied, working childless adults. it's primarily about the individual market. a very small slice.

about 5% of the american population is in the individual market. and yet obamacare's faulty architecture was causing that small slice of the american population to bear the full social cost of covering people with high cost and preexisting conditions. it didn't work. now -- >> hold on a second. just to make some points that matter. first, on expenditures, just quickly -- >> yep. >> yes, you can't take profits out of capitalist society. true. but you can go at the businesses about what they're charging and why these costs are so high. specifically on drugs. i know you want to work on that. >> right. >> why are they charging so much for these drugs? it's not about their profits, it's about what they put into the cost structure. >> because we have taken consumers out of the equation. 32% was funded by insurance and government. look what's happened today. a little over a dime, 11% now, is paid for directly by the patient. the rest is covered by government insurance. you don't have consumer-driven price competition where

consumers are demanding, fifl, to know what things cost. they don't know, don't care, because somebody else is paying. we care deeply how much we pay for insurance that. is so far removed from what is actually happening at the provider level. so consumer-driven price competition works in every other economy but doesn't work in health care. >> except that health care isn't like anything else, right? >> right. >> the idea that competition will make it better, we haven't seen health care that has been greatly improved from a cost pkt because of competition. people need health care, it's much more expensive. it's something you need, even if you think you don't need it. >> obviously, you're not going to go and price out what happens for a provider when you have a heart attack. but when you're getting lasik eye surgery, the result of that consumer-driven price competition, the quality of the eye surgery has increased, the prices come down. it works. it will work in a large segment of our health care system. not 100%, maybe 50, 60. look what happened with hsas, health savings accounts, because people had higher deductible

plans, cvs, walgreens, walmart, developed walk-in clinics where you can go and get your kids' ear infection diagnosed versus the emergency room at $200. >> one, health care savings accounts is only good if you have the money to put into it. two, health care is so much more complex now. it used to go that if you had to get your appendix out, god forbid, they went in, took it out, that's it. now they have all of these tests. so you're getting more care and there's more cost. >> and endoscopic surgery, which reduced the cost, because it reduces the hospital stay. i use that to apply to the market. let's go on to what i was continuing to emphasize about the faulty architecture. this is the trend line in premiums prior to obamacare. in 2013, an average american was paying $232 per month. because of obamacare, this is according to hhs, premiums increased 105% nationwide, up to

476 d $476. and here's the new trend line. one thing i laid out for our senate colleagues who were saying the senate bill would reduce premiums 30% to the trend line, we're still not bringing it down to where we should, if we tul did a root cause analysis of what caused this trend line to increase and we have the answer, because hhs, commissioner study by mckenzy. here's one example, ten. their premiums tripled in t tennessee for a 40-year-old male. >> nonmedicaid expansion site. >> here's the main cause. covering people's conditions. and community rating. chris, here's the good news. you can actually cover people with preexisting conditions, like maine did, didn't repeal guaranteed issue, supplanted it with visible high-risk pools. this is what their premiums were prior to implementing invisible high risk pools. this is what they went to. this is a third of what it was

prior to. that's about a half. so they cut premiums in half to two-thirds by instituting an invisible high-risk right. >> right. which is a great -- invisible high-risk pool. two things. one, they put an assessment on. like 4 bucks per person. and two, they have a different demographic p demographic perspective. that's why susan colorado i believe so, one of the senators from maine, said the money you're putting into the senate bills right now to try to affect what they did in maine is not nearly enough. >> well -- >> need much, much more money. it's very expensive to do a high-risk pool. >> this shows it works. we had high-risk pool in wisconsin, worked very well. we can work on the details of that. the point being, what obamacare did is forced a small percentage, about 5 to 6% of the american population to bear that full -- >> that disproportion of costs. >> covering people with high cost, preexisting conditions. what i'm saying is spread it out over everybody. yeah, do an assessment. premiums, plus an assessment on

insurance companies, which they spread over the rest of the population. it's a fair way of doing it. without tripling insurance premiums, which, again, if you make too much money -- these are the people bill clinton was talking about, 60 hours a week, their premiums doubled or tripled and coverage cut in half. that's unfair. and they were the forgotten men and women of obamacare. >> you seem to be making a very strong case for what needs to be fixed. but why do you have to repeal and replace what's already there when a lot of it is working to deal with what you admit in two different charts is a small slice of the people affected who are being disproportionately hit by costs? why not fix that and not scrap the whole thing. >> because it caused premiums on the national average to double and in tennessee triple. we need to address that honestly. now, we say repeal so you can fully replace with something. maybe it is fixed. i've been talking quite some time, repair the damage done by obamacare. >> you guys wouldn't talk about fix. >> i did. i was talking about it all of the time.

>> that's why you're on here alone. >> transition to something that works. which is what i'm going to use my committee for over the next few months to lay out these realities, hearing after hearing, do a problem-solving process. start the information, set achievable goals. this is an achievable goal, chris, which we complete ignored during the senate debate. >> you have to plow through the politics, because they like repeal and replace and now you have the president making it the bar. maybe this is the way to go. do it inkre mentally. >> this is fabulous. >> they're saying that john king may have competition. and it is embarrassing to me that in your first time out you're way better at using the wall than i am. but senator, thank you. >> i'm a business guy. >> and you know what, this is an important conversation. thank you for helping us. >> thank you for having me on. >> absolute. there is a lot of news this morning. did north korea just cross what the president said was a red line? and if so, what will fire and fury mean? let's get after it.

cnn learned of an unannounced raid on paman afort apartment. >> stay tuned. >> this is a new day with chris cuomo. >> good morning, north korea appears to have crossed president trump's red lin