The New York Times finally caught up with the phony claim Max Baucus and CBO foisted on the media that the Baucus reform bill is the only bill that is deficit neutral. But that’s all smoke, mirrors, and heroic assumptions about how much Congress will cut Medicare payments to doctors and allow middle-class taxes to rise.

Some background: When the House bills came out, CBO’s scores showed them costing about 1.2 trillion for a ten-year period. The House bill did not tax high-end insurance, but it did cut Medicare Advantage subsidies and impose a surtax on incomes over $360,000 — later raised to half a million or more. But CBO scored one House plan as producing a ten-year $240 billion budget deficit, with greater problems after that, primarily because the surtax would not rise as fast as health care costs.

In seeming contrast, the Baucus bill came in about $869 billion in costs, and it offset that with Medicare cuts/saving and various taxes, including an excise tax on high-end insurance plans. That tax would kick in on values in excess of $8,000 for individuals and $21,000 for families. CBO said that package would produce about an $81 billion surplus in the first ten years and even higher surpluses in the next decade. A clear winner, right?

Nope. The Senate Finance bill covered about 8 million fewer people and provided much lower subsidies than the House bill. So Baucus claimed a slight surplus by making mandated insurance unaffordable and excluding millions. But the real budget gimmicky was elsewhere.

Baucus Budget Game 1: Near the end of this article, the Times reveals the game that’s being played regarding whether Congress will allow statutorily scheduled reductions in Medicare payments to doctors to go into effect, or whether Congress, as they usually do, will override those scheduled cuts and give doctors serving Medicare patients a raise.

The bottom line: the House bill eliminated the cuts over the 10-year period and counted the costs, making their total over $220 billion higher. But Baucus/Finance bill dealt with only one year and pretended the problem would go away after that.

The House legislation includes a $228.5 billion provision to avert cuts in Medicare payments to doctors and permanently replace the payment formula to provide annual increases. The Senate Finance Committee bill provides $10.9 billion to avert the cuts for one year.

Lobbyists for the American Medical Association and other physician groups met with Senate Democratic leaders on Wednesday to discuss a long-term fix. Under current law, doctors face cuts of 21.5 percent in January and about 5.5 percent in each of the next four years.

In other words, if the House had ignored the problem the way Baucus did, their CBO-scored ten-year deficit would virtually disappear. Or if Baucus had faced and solved the problem as the House did, instead of pretending it would go way, the CBO-scored Finance surplus would have become a significant deficit.

Now both the House and Senate want to solve the doctor payment issue — give them a raise so they don’t frighten seniors! — but do so outside the health bills (and escape CBO) and probably not pay for the solution. (Think of this as a 10-year, $200 billion stimulus plan for doctors financed through deficits. This is from a Congress that would choke if they were asked to provide $100 billion stimulus for a jobs program.)

Baucus Budget Game 2: A remaining claim by Baucus/CBO is that the Finance bill’s tax on high-end insurance plans is structured to bring in increasing revenues in the second decade, because of how it’s indexed at less than the expected escalation in insurance premiums. But that means the tax will come to apply to more and more plans as premiums rise above the threshold at which the tax applies. (Hence, the unions who have negotiated long-term, decent health plans strongly oppose this tax.)

CBO assumes people will escape that tax and take more income in wages (for which they’ll pay income taxes) instead of paying higher insurance premiums. But either way, their taxes will rise and affect more and more middle-class workers. We can guess what will happen.

Just as it has done with the Alternative Minimum Tax (and now the doctors’ Medicare payments), Congress is likely to intervene in future years to prevent the escalating tax imposition from taking effect.

When this happens, the tax revenues that CBO projects will be captured under the Baucus bill will not be there, and whatever “advantage” Baucus claims for the Finance tax approach versus the House surtax approach will likely become a mirage.

In the meantime, Peter Orszag and Doug Elmendorf and the fiscal scolds will tell us we can’t do much more to make mandated insurance affordable, because that might upset the carefully balanced deficit neutrality they’ve achieved in the Baucus bill. Smoke and mirrors.

Update:
WaPo, (h/t oldgold) CBO scores revised House bills at $859 and $905 billion.