To your question,
yes, unless you want some negative repercussions,
you want to report the 1099-SA.The 1099-SA and 5498-SA are companion forms - the 1999-SA shows what distributions there were from your HSA and the 5498-SA shows what contributions you made to the HSA. The information for both of these end up on the form 8889.
The 8889 must be filled out if you want to (1) benefit from the tax break for contributions you made to the HSA, and (2) don't want to be taxed on the distributions. Otherwise you are very likely to get a letter from the IRS asking for some money, because without the 8889, they will assume that your entire distribution was spent on non-qualified expenses and tax you one them.
