Senate’s 1099 repeal shows Obamacare’s edifice is crumbling

Although the U.S. Senate voted along partisan lines Wednesday to defeat repeal of the Patient Protection and Affordable Care Act — also known as Obamacare — it overwhelmingly on the same day voted to repeal one of the provisions that has proven most burdensome to entrepreneurs: the mandate for business to file IRS 1099 reports on any purchase over $600.

The House should follow suit, and President Obama should be true to his newfound dislike of the provision and sign the repeal into law. Then, while the law’s constitutionality is before the courts, Congress should continue pruning the branches of Obamacare that have proved to be the most burdensome to doctors, entrepreneurs, consumers, and savers and investors.

The next “branch” that should be up for pruning is the stealth “medicine cabinet tax” that prohibits consumers from purchasing over-the-counter drugs — including pain relievers, prenatal vitamins, and Pedialyte for kids — with their flexible spending accounts and health savings accounts unless they go through the cumbersome process of getting a doctor’s prescription. The Los Angeles Times reports that Sen. Kay Bailey Hutchison (R-Texas) and Rep. Erik Paulsen (R-Minn.) plan to introduce measures that would get rid of this provision next week.

Both provisions impose incredible paperwork burdens that should have been considered before the law was rammed through last year.

Sen. Mike Johanns (R-Neb.), who supported the 1099 repeal before it was “cool,” has shared powerful examples of how the rule is harming small entrepreneurs in Nebraska and across the country. A small fire truck manufacturing company told him the rule will cost the firm an extra $23,000 in accounting fees. A restaurant owner says the rule “forces me not to hire local vendors” and instead go through a “single regional contractor.”

The “medicine cabinet tax” on HSAs and FSAs has created a similar paperwork burden as well as outright confusion about how to comply with the law. Requiring a prescription defeats the purpose of over-the-counter drugs. The number of prescriptions that consumers have to request and doctors have to write and renew could likely go up more than tenfold.

That is, if consumers simply don’t decide to get the prescription drugs that may now be cheaper for them to buy, but more expensive to the health care system. As an editorial in the San Jose Business Journal puts it, “No one is going to pay for the doctor’s visit, spend time in the doctor’s office, or schedule time off work to accomplish this.”

Retailers also face a big burden. Payment systems were already programmed through the industry-developed Inventory Information Approval System with a list of eligible OTC drugs for medical account debit cards to prevent cheating with these accounts, alleviating one of the concerns this provision supposedly addresses. But now, cashiers may have to play the role of pharmacists in verifying prescriptions, a process that will likely add substantial costs in time and money, resulting in price increases across the board for retail items.

Obamacare’s edifice is crumbling in the courts and in Congress. Although the 1099 rule and medicine cabinet tax can both be ended before full repeal of the health care law, it should be remembered that they were enacted because of the flawed process of ramming this bill through Congress.

Both are gimmicky revenue “offsets” done so the Congressional Budget Office would technically score Obamacare as reducing the deficit, and score repeal of the law or even of these individual provisions as increasing it.