What they CAN and MUST do, is screen the parents for these things and then breed only healthy animals. This WILL reduce but NOT eliminate the risk for the buyer. YOU as the buyer must educate yourself to the most common health problems in the breed you wish to purchase, and then only buy from breeders who screen and certify their breeding dogs to be free from these health concerns.
Some guarantees extend for longer periods and more defects.
A few will refund your money, but common practice is to replace a pup with a pup. Good breeders guarantee you they will help you find a home for your dog, should the need arise. They usually will not buy the dog back from you, but they also will not re-sell the pup to someone else, they will simply place it in a good home. The good breeders I know, and there are many, really want their pups and the new owners to work out. Both sides need to represent themselves honestly, and remember it's a living, imperfect being they are dealing with, not a piece of equipment.