Senate Finance Committee Chairman Max Baucus (D-MT) has announced that he will introduce legislation to repeal the 1099 reporting requirement in the Affordable Care Act. The provision, which requires small businesses to report any purchases over $600, was intended to increase the tax compliance of sole proprietors, but has been condemned as overly burdensome by a bipartisan group of lawmakers — including President Obama, House Speaker Nancy Pelosi — and small business advocacy organizations like the National Federation of Independent Businesses (NFIB). The Congressional Budget Office (CBO) estimates that the requirement would generate $17 billion in revenue over 10 years.

“The proposal was originally written to keep taxes low by giving the IRS more tools to ensure all owed taxes were paid,” Baucus’ press release reads. “However, following passage of the law, some business owners expressed concern that when the provision does go into effect, the forms would place too large of a paperwork burden on businesses struggling in a still-recovering economy.” In response to those concerns, Baucus said he would “repeal the new reporting requirements and look for other ways to improve tax compliance and keep taxes low.”

Two previous efforts to repeal the measure failed in the Senate. Sen. Mike Johanns’ (R-NE) proposal would have repealed the tax reporting requirement for small businesses, but made up for the $17 billion revenue shortfall by eliminating $11 million from the Preventive Health Task Force and weakening the individual health insurance mandate. Sen. Bill Nelson’s (D-FL) alternative proposal would have required only larger businesses to report their transactions with vendors. Baucus’ office did not specify how the Senator would pay for the repeal or return requests for comment.

NFIB President Dan Danner praised Baucus’ announcement just minutes after it became public. “We are pleased Senator Baucus has announced his support for full repeal of the 1099 provision and are eager for him to formally introduce his bill when Congress returns,” Danner said in a statement. “The sooner Congress repeals this burdensome provision, the better.” Asked about the organization’s quick response, NFIB spokesperson Stephanie Cathcart told me the group has worked closely lawmakers on both sides of the aisle to build momentum to repeal the provision. She said NFIB did not help craft the Baucus’ particular repeal provision.

For repeal to succeed, Senators would have to waive the pay-go rules or find $17 billion in savings — a tall order given today’s partisan environment. Democratic have previously proposed paying for repeal with unspent stimulus funds (a bad idea), changing the inheritance tax (which is likely to get some GOP support) or levying a tax on carried interest.

Two new polls solidify last week’s argument that most Americans don’t support repealing the health law. The surveys from Gallup and AP-GfK chip away at the Republicans’ argument that they have a mandate to eliminate or defund the health law:

- Gallup poll released this morning: 42 percent want to repeal it in some way, shape, or form. 49 percent would keep it or expand it. Significantly, 43 percent of Independents believe it goes to far and should be repealed, why the majority, 46 percent of want to keep or expand it.

- AP-GfK poll released on Thursday morning: 39 percent want to repeal of scale back the law. 58 percent would keep it or expand it. 21 percent want to leave it as is; 38 percent want to expand it.

Last week’s national exit polls found that 48 percent of Americans want to repeal the law, while 47 percent would keep it or expand it, suggesting that neither party has a mandate on the issue. But Senate Minority Leader Mitch McConnell (R-KY) still pressed on the party’s repeal rhetoric, arguing that Americans wanted to eliminate the law. [W]hether or not the administration has a mid-course correction, Republicans have a plan for following through on the wishes of the American people,” McConnell said in a post-election speech titled “Listening To The People Who Sent Us Here.”

“It means sticking ever more closely to the conservative principles that got us here…And, above all, it means listening to the people who sent us here,” he added. Unfortunately, McConnell didn’t explain what it would mean if his “conservative principles” clashed with “the people who sent us here.”

Thirty-five economists have filed a friend-of-the-court brief in the Florida-led multi-sate lawsuit challenging the constitutionality of the Affordable Care Act. The Florida case alleges that the law’s minimum coverage requirement — also known as the individual mandate — represents an “unprecedented encroachment on the liberty of individuals living in the Plaintiffs’ respective states” and violates the Commerce Clause of the Constitution. “The Act is directed to a lack of or failure to engage in activity that is driven by the choices of individual Americans. Such inactivity by its nature cannot be deemed to be in commerce or to have any substantial effect on commerce, whether interstate or otherwise,” the suit contends. “As a result, the Act cannot be upheld under the Commerce Clause, Const. art. I, § 8.” In October, U.S. District Court Judge Roger Vinson dismissed three of the Plaintiff’s claims, but allowed their challenge to the law’s minimum coverage provision and a separate complaint about the law’s Medicaid expansion provision to move forward.

The group of 35 economists — which includes three Nobel Prize winners and two recipients of the John Bates Clark award for the Outstanding American economist aged 40 and under — contends that the Plaintiffs’ arguments against the minimum coverage requirement ignore the fact that health care is different from every other sector of the economy. As CAP Senior Fellow David Cutler, one of the signatories to the letter, argues in this memo, “the minimum coverage requirement is ‘necessary to achieving’ Congress’ goal of reforming the national health insurance market and making quality medical care available to millions of Americans.” The economists lay out their case in three points:

1. Once can’t leave the medical market: Because of unforeseen illness, accident, or simply the aging process, all people are at risk of needing medical care, and when they do, such care cannot be put off. Over half of the uninsured use medical care in a typical year.

2. Care must still be provided to those in need: The Emergency Medical Treatment and Labor Act, which requires hospitals to care for those in acute need, whether they can pay or not, is not present in any other market.

3. Costs of caring for uninsured shifted to the insured: Over $40 billion of medical spending annually is shifted from the uninsured to the insured in the form of ‘cost shifting.’ Billions more are paid for when the uninsured become insured and use more care for untreated conditions.

“In other words, the minimum coverage requirement is a ‘necessary and appropriate response to the unique economic features of the health care market,’” Cutler writes. “The ‘parade of horribles’ – the idea that allowing the minimum coverage requirement will open the door to every other form of regulation the government might want – that conservatives argue will result from sanctioning this action is simply incorrect.”

Hearings in the case begin on December 16th. Read the entire memo and the list of economists HERE. The amicus brief can be found HERE.

I’ve been tracking the health industry’s reaction to the GOP’s repeal rhetoric because I suspect that Republicans will be more influenced by lobbyists than grassroots tea partiers. And therein lies the conflict. Because unlike small-government activists, most in the health industry are opposed to repeal, as Reuters’ Susan Heavey found out after speaking to health insurance CEOs at the Reuters Health Summit:

Company executives at the Reuters Health Summit this week said the law is far from perfect and said they will push for more steps to tackle stagnant health information technology and skyrocketing costs. But after two years of debate over the issue, they need to move forward with clear steps on how to realign their businesses.

The new healthcare law created “a stable, predictable environment, however painful it has been in the short term,” GlaxoSmithKline Plc’s Chief Strategy Officer David Redfern said at the summit in New York. [...]

Even insurers, which were vilified by Democrats in passing the reforms, said they don’t want a repeal, even as they push for clarity on forthcoming rules and seek additional changes.

Cigna Corp CEO David Cordani and Aetna Inc President Mark Bertolini both urged the nation to move forward on the overhaul. [...]

Kris Jenner, portfolio manager at T. Rowe Price Healthcare Sciences Fund, said having Republicans in greater power should reduce pressure on industry. “That level … negative rhetoric is likely to be scaled back. And from a stock level, that is a positive,” he said.

The successful passage of health reform ended a period of business uncertainty for insurers and brought about a mostly favorable law that the industry can live with and even “improve” with the help of House Republicans. Former industry insider Wendell Potter described their goal this way, in my interview with him on Monday:

POTTER: I think they have to realize that they’re better off with this. Their business models were not sustainable without reform.

They lost their means of being able to control costs like they felt they could do at the beginning of the managed care era. There was such a push back, they lost a lot of their leverage with providers, certainly with consumers. Their magic bullet now is to shift costs to consumers. You can’t keep doing that. It’s not sustainable over the long haul. You would continue to have more and more uninsured and underinsured because of the cost-shifting. You can’t keep doing that, people will ultimately decide that the coverage is not worth buying. So they have to have reform, they needed to have this infusion of new revenue [from the mandate].

Back in April, Minnesota Attorney General Lori Swanson (D) rebuffed Gov. Tim Pawlenty’s (R-MN) request to challenge the constitutionality of health reform and filed a friend-of-the-court brief supporting the federal government. “Having carefully reviewed the applicable Supreme Court precedent and other legal authority, it is my legal opinion that health care — which comprises over one-sixth of our country’s economy — substantially affects interstate commerce,” and is thus constitutional, Swanson wrote in a letter to Pawlenty defending her decision.

Unentered by this legal analysis, however, Pawlenty (along with Rhode Island Gov. Donald Carcieri (R)) has filed a legal brief “seeking permission to submit a friend-of-the-court brief in support of a suit originally filed by Florida and joined by 19 other states”:

The governors have a “obligation to their citizens to safeguard these protections against federal abuse of the spending power,” said the filing by Pawlenty and Carcieri, which was written by a lawyer from the Washington-based Competitive Enterprise Institute.

Their brief would focus on the failure law’s amendments to Medicaid “to meet one of the traditional restrictions on Congress’s spending power, the requirement that statutes be clear and unambiguous in what they require of States,” it said.

The document argues, “Although the Act indicates that the federal government will initially pay for some Medicaid expansions, the states are advised that they will pay for 10 percent of some unspecified costs in four years, and there is no indication that the states will not pay more in succeeding periods.”

As Politico’s Kendra Marr rightly notes, “Pawlenty’s move, which comes just weeks before his eight-year term in office ends, could be the opening shot of a bid for the 2012 Republican presidential nomination.”

The Affordable Care Act has been his target for some time and this brief is only the latest in a series of very public and calculated efforts — the frequent public condemnations, the executive order prohibiting state agencies from applying for funds — to manufacture a history of opposition. Predictably, Pawlenty appeared on Fox News’ ‘On The Record’ yesterday to talk about his brief just hours after filing it. “I feel strongly about this, Greta. I think if we allow the federal government to do this, it’s basically the end of the understanding that we’ve had throughout the history of this country in federalism,” he said.

Pawlenty wasn’t too concerned about the future of federalism or the specificity of the law’s spending requirements earlier this month, however, when he relied on a loophole in his executive order to allow the state to apply for federal funds from the Affordable Care Act. So far, Minnesota has received some $11.1 million in ACA grants.