The president’s fiscal plan is also expected to draw on options the White House had put on the table in talks with John Boehner, House speaker, over a “grand bargain” on fiscal reform. Those discussions eventually fell apart.
During those discussions in July, the White House had agreed to $425bn in cuts to Medicaid and Medicare – with $150bn extracted from Medicare providers such as doctors and hospitals, $150bn coming from Medicare beneficiaries, and $125bn coming out of reforms to Medicaid, administration officials said at the time. Among the menu of policy ideas to reach those targets were an increase in the eligibility age for Medicare.
Allowing Medicare more flexibility to negotiate drug prices with pharmaceutical groups and preventing special deals delaying the entry of generic drugs into certain markets could also be part of the plan.
Mr Obama’s plan could also feature a change in the way the US government measures inflation, switching to a less generous chained-consumer price index. The biggest impact of this measure – which could save between $250bn and $300bn over ten years – would be felt by recipients of Social Security, the retirement scheme.
During the failed July talks, the White House agreed to put that change in place starting in 2015, but with protections for low-income workers.