UPDATE 1-Republicans seek to bleed Obama's US health reform
* Republican control of House sets up healthcare fight
* Repeal unlikely but funding could be attacked (Adds Pelosi comments)
By Donna Smith
WASHINGTON, Jan 4 (Reuters) - Republicans armed with new power will pounce on one of their top targets, President Barack Obama's hard-fought healthcare reforms, when the U.S. House of Representatives reopens for business on Wednesday.
Although Obama's Democrats, who still control the Senate, can probably rebuff any attempt to repeal the overhaul, House Republicans say they will try to choke off its funding and delay its implementation.
The reforms, passed early last year as the legislative high point of Obama's first two years, were aimed at addressing the huge cost of U.S. healthcare and eventually extending health insurance to all Americans.
But Republicans, portraying them as a costly extension of government control over people's lives, have vowed to reverse them and set a House vote on their repeal for January 12.
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While such a drastic move faces a block in the Senate, it will give a stark signal of their intentions and foreshadow a dogged campaign to cut off funding for the many changes due in coming years. [ID:nN04159258]
"They are not going to get what they want on funding for healthcare. The House is not going to give it to them," said a senior Republican Senate aide.
"All of this slows it down, by slowing it down it gives us a real opportunity, when we take over the Senate and or the White House in 2012, to take this law apart piece by piece," the aide said.
Republicans, particularly from the fiscally conservative Tea Party group, were more emboldened to attack the healthcare reform after big wins in November's midterm congressional elections.
The White House says it is confident Congress will not repeal the bill. Obama would probably veto any repeal measure that did pass.
Outgoing House Speaker Nancy Pelosi said Democrats would emphasize popular aspects of the law like mandatory coverage of children with pre-existing conditions and stress that reversing the law would only add to the budget deficit.
"To say we're going to repeal it ... is to do very serious violence to the national debt and deficit," Pelosi told reporters on Tuesday. "You can't just say I like the palatable parts of this but I don't want the structural change that is required."
A key battle over money for healthcare reform could come by March when a temporary funding bill for the government runs out. Republicans balked at $1 billion to start implementing the healthcare law that had been included in an earlier longer-term funding bill.
"They could just dig in their heels and refuse to pass a (spending) bill," said Eric Zimmerman, a partner with the Washington law firm McDermott Will and Emery. "We'll have to see who is willing to succumb in that game of chicken and what the public thinks of that."
Republicans will use control of the House to point to weaknesses in the law and increase public doubts about it.
Representative Fred Upton, the incoming chairman of the House Energy and Commerce Committee, has promised to hold hearings on the "unconstitutional aspects" of the reforms.
Polls have shown tepid public support for the new law, but also indicate people are willing to give it a try. The U.S. healthcare system is the most costly in the world and still leaves about 50 million people without medical coverage.
Health insurers are coming off a strong financial year, as results were helped by fewer people going to the doctor and undergoing procedures to save money, but they face new limits on their profit margins in 2011 under the new law.
Shares of U.S. health insurers have slightly lagged the broader market since the mid-term elections. The Morgan Stanley Healthcare Payor index .HMO of large and small health insurers is up 4 percent since the election, compared with a more than 6 percent rise for the broader S&P 500 index .SPX.
A series of legal challenges by states, rather than any action in Congress, may have the best chance of bringing down healthcare reform. A judge last month backed a challenge by Virginia to a key element of the reform. [ID:nN13251084]
Some of the more popular aspects of the overhaul, such as allowing young adults to stay on parents' policies until they turn 26, have already taken effect.
Ron Pollack of Families USA, a healthcare advocacy group that pushed for the reform, said Republicans could end up regretting the hard line.
"I believe these things are going to backfire politically," he said. "When Republicans vote for repeal proposals, the public is going to understand that they are trying to take away from the American public what these same members of Congress receive, courtesy of the taxpayers, in terms of their health benefits and rights."
Pollack said the administration had sufficient funds to continue implementing the law even if Republicans refuse to appropriate additional money.
Republicans say the new law would cost the government more than estimated and did little to contain medical costs. Penalties for employers who do not provide health insurance to workers will discourage job creation, they argue.
To reduce costs, they say, it would be better to simply allow insurers greater ability to sell policies across state lines, which they say would increase competition, and impose limits on medical liability. (Additional reporting by Patricia Zengerle and Kim Dixon in Washington and Lewis Krauskopf in New York; Editing by David Storey and Vicki Allen)
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