If Republicans are successful in repealing last year’s health law, they want to replace it with legislation that would give states far more discretion about how to cover people, according to a top Senate Republican.

“There are some things that Washington can do better. National security is one of them,” said Sen. Orrin Hatch of Utah, currently the top Republican on the Senate Finance Committee and former chairman of the Senate Health, Education, Labor and Pensions panel. “But health care is not.”

In a speech to the conservative Hudson Institute, Hatch said the GOP ideal for health overhaul would look more like the welfare overhaul of the mid-1990s. That law “took ideas from the states – not just Washington – and gave them considerable flexibility to operate their own programs,” he said.

Hatch thinks states, rather than Washington, know better. “There is an enormous reservoir of expertise and experience in the states,” he said. “And any federal reform of the nation’s health care system should take advantage of this state-based wisdom.”

Hatch has a long history in health care, having collaborated on many bills with the late Sen. Edward Kennedy, including creation of the Children’s Health Insurance Program in the late 1990s. But Hatch is treading carefully these days. He is up for re-election in 2012 in a state where his longtime colleague, Robert Bennett, was ousted by Tea Party conservative Mike Lee in 2010.

That may help explain why he was so light on specifics of what a Republican-shaped, state-based system might look like.

Hatch, however, had plenty of specific criticism of the existing law, which he called “a sinking ship.” And, he said, “when it starts to go below the waves, the very groups and organizations that sought refuge in the deals with the White House will be the first groups Democrats turn to for more money to fill in the holes.”

States must also be spared their existing requirements under the joint federal-state Medicaid program, which Hatch called “not just unrealistic and irresponsible” but “immoral.” He said he plans to introduce legislation to ease federal Medicaid requirements for states.

For now, however, Hatch said he recognized that the votes are not there in the Congress to repeal the entire law. “Short of repealing Obamacare wholesale, we will do so retail – through death by a thousand cuts,” he said. “We will fight this until we win.”

But in the meantime, he hasn’t lost his sense of humor. Much to the delight of the mostly partisan crowd, Hatch told a rather lengthy joke about a rancher who takes a poke at his political opponents. You can listen to it here.