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*Plan to start process with aggressive oversight
*Democrats say effort will "gut" benefits
By Donna Smith
WASHINGTON, Jan 20 (Reuters) - Republicans in the U.S. House of Representatives on Thursday launched a plan to replace President Barack Obama's healthcare overhaul "branch by branch" with measures they say would bring down soaring costs.
"The tree is rotten, you cut it down. If we can't cut it down and succeed doing that all at once, we'll prune it branch by branch," said House Ways and Means Committee Chairman Dave Camp.
His is one of four committees tasked on Thursday with rewriting the healthcare law.
"Today is day one of our efforts to replace Obamacare with something better," Energy and Commerce Committee Chairman Fred Upton said, using a derisive term for the healthcare law.
His remarks came one day after the House moved to repeal Obama's healthcare law.
The repeal is unlikely to be considered by the Senate, which remains narrowly controlled by Democrats after November's congressional elections.
"The process starts ... with aggressive oversight of current law," said House Education and the Workforce Committee Chairman John Kline.
The committee chairmen said they have scheduled a series of hearings on the current law and its impact on healthcare costs, the economy and employment.
Democrats accused Republicans of trying to "gut" the law and "return power to health insurers." They said Republicans should be focusing more on the health of the U.S. economy.
"Families don't want us to turn our health care system back over to insurance companies," said Representative Sander Levin, the top Democrat on the Ways and Means Committee. "Instead of turning back the clock on health care reform, we should be zeroing in on job creation."
Camp said the goal was to replace the current law with something that would help bring down the cost of insurance and expand medical coverage as well as protect the 170 million Americans who get health insurance through employers.
The healthcare law enacted last year would extend medical insurance to more than 30 million people uninsured people. But Camp said about a third of that expanded coverage would come through the state-run Medicaid programs for the poor.
"That's is not healthcare reform, that's entitlement expansion," he said. Republicans have not projected how many uninsured would receive coverage under their effort.
One measure Republicans are considering is limiting medical liability lawsuits, which the non-partisan Congressional Budget Office has said could save about $54 billion over 10 years.
Many of the possible changes the Republican chairmen said they would consider have been proposed before but were rejected by Democrats who wrote last year's healthcare overhaul.
They include allowing insurance companies to sell policies across state lines and expanding the ability of small businesses to form insurance pools in order to take advantage of lower group rates.
The law enacted last year calls for state-based insurance exchanges to be created by 2014 where individuals and businesses could shop for coverage and compare prices and benefits.
The most controversial provisions include a requirement that most individuals obtain health coverage and penalties for some employers who do not offer health benefits to workers.
The mandate for insurance coverage, which takes effect in 2014, is being challenged in federal courts and the question whether the requirement is allowed by the U.S. Constitution is expected to be decided by the Supreme Court. (Editing by Cynthia Osterman)