KHI News Service

Farm groups fighting new paperwork requirement in health reform law

Expanded 1099 tax form reporting too burdensome they say

By Mike Shields | August 23, 2010

The Kansas Farm Bureau and its national counterpart are among the business groups seeking repeal of a tax reporting requirement that was included in the new federal health reform law. But Farm Bureau spokespeople said the quarrel wasn't over health reform per se.

"We don't even consider this part of health reform," said Pat Wolff, a tax specialist for the American Farm Bureau in Washington, D.C. "It's almost so inconsequential to health reform. There are some major issues we have with the health care bill. But we're treating this as a tax issue. This is a government-regulation issue for us.

"You can fix it without having anything to do with health care," she said. "We just need to get it off the books before it starts, so business doesn't have this burden. It's even questionable whether the paperwork burden would have any difference on the amount of taxes collected."

Wolff was referring to a provision in the Affordable Care Act that would require annual reporting to the Internal Revenue Service of all business purchases of $600 or more from a single vendor.

Farmers and other business people already are required to file 1099 forms when they spend $600 or more on services. A veterinarian's bill would be an example of reportable services for a farmer. But the health reform law, starting in 2012, would expand the 1099 reporting requirement to also cover the purchase of goods such as seed or fertilizer.

The idea behind the provision was that expanding the reporting requirement would give the IRS a stronger tool for cross checking whether businesses were accurately reporting income and paying their fair share of taxes.

"So much upheaval"

But that piece of the 2,000 page health reform law went largely unnoticed by health policy experts and others in health-related field. Nor did it figure prominently in the rhetoric as the reform was being debated in Congress. But once it became law in April, farm and business groups almost immediately began beating drums of alarm and there now are at least three proposals before Congress that would repeal or modify the reporting requirement - two in the Senate and one in the U.S. House.

It could turn out to be the first alteration of many for the still-controversial health reform plan, major provisions of which don't kick in until 2014.

"Since there's so much upheaval and this has drawn so much attention, it's being considered again in Congress and supposedly they're going to address or rewrite it, figure out another way to do that," said Adele Hughey, a spokesperson for the regional office of the U.S. Department of Health and Human Services in Kansas City.

Hughey said the regional HHS and the Small Business Administration offices were planning forums next month with small business groups to discuss the new requirement.

But the issue could be moot by then because the U.S. Senate is expected to take it up when members return from summer recess.

"The outcry from around the country has been so great that both Democrats and Republicans agree something should be done," Wolff said. "There are competing amendments pending in the Senate. The Johanns' amendment would repeal it outright. The competing amendment from Bill Nelson of Florida would exempt employers of less than 25 and raise the reporting threshold from $600 to $5,000.

"We're under pay-go rules in Washington, so if it is eliminated they would have to offset the cost with a new tax or reduce spending in other areas. That's where much of the argument is now."

Public health funding on the line

The proposal from U.S. Sen. Mike Johanns, a Nebraska Republican and former secretary of agriculture, would offset the cost of eliminating the requirement by gutting other provisions in the health reform law that would funnel billions of dollars to states and communities to advance wellness and prevention programs.

His plan has public health officials and some of their Democratic allies in the Senate fretting.

"Simply put, it is penny wise and pound foolish to take money away from a fund that will rein in health care costs by investing in proven prevention interventions," said Bergen Kenny, a spokeswoman for U.S. Sen. Tom Harkin of Iowa.

Time to tweak

But a spokesman for Kansas Farm Bureau said it wasn't uncommon for Congress to "tweak" major legislation once there was better understanding of potential consequences.

"There's a feeling within the family farm and ranching community that maybe some tweaks are in order with respect to how this will impact them," said Mike Matson, a spokesman for Kansas Farm Bureau in Manhattan. "This is a classic case of great big, broad, sweeping legislation with perhaps unintended consequences and with those kinds of things there's always tweaks that occur post game."

Wolff said American Farm Bureau is not on the bandwagon of those seeking total repeal of the health reform law.

"Repealing the health reform bill is not realistic," she said. "What is realistic is changing it to make it more friendly to small business. So, that's where we're engaged."

She said Farm Bureau would like to see stronger cost control elements in the reform package.

Some elements of the reform would help farmers and ranchers, who generally have a hard time finding affordable health insurance.

"Certainly the access to insurance and the (insurance) exchanges will be helpful," she said, "but that's down the road and we have to deal with cost containment. Making insurance available is only part of the equation. You have to be able to afford it. We have to be concerned about cost containment."

But public health officials said funding the prevention programs that the Johanns' proposal would gut are critical to controlling health care costs.

"If you take away this prevention element from the mix, you lose the cost savings benefit that the health reform bill was intended to have," said Dr. Jason Eberhart-Phillips of the Kansas Department of Health and Environment.