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Obama Offered To Raise Medicare Eligibility Age As Part Of Grand Debt Deal

Obama Debt Ceiling

First Posted: 07/11/11 03:29 PM ET Updated: 09/10/11 06:12 AM ET

WASHINGTON -- In his press conference on Monday morning, President Barack Obama repeatedly insisted that he was willing to tackle some sacred cows as part of a larger package to raise the debt ceiling. Just how sacred, however, may surprise political observers.

According to five separate sources with knowledge of negotiations -- including both Republicans and Democrats -- the president offered an increase in the eligibility age for Medicare, from 65 to 67, in exchange for Republican movement on increasing tax revenues.

The proposal, as discussed, would not go into effect immediately, but rather would be implemented down the road (likely in 2013). The age at which people would be eligible for Medicare benefits would be raised incrementally, not in one fell swoop.

Sources offered varied accounts regarding the seriousness with which the president had discussed raising the Medicare eligibility age. As the White House is fond of saying, nothing is agreed to until everything is agreed to. And with Republicans having turned down a "grand" deal on the debt ceiling -- which would have included $3 trillion in spending cuts, including entitlement reforms, in exchange for up to $1 trillion in revenues -- it is unclear whether the proposal remains alive.

"That is one of the things they put on the table as part of a big solution," said one senior Republican Hill aide.

"It was considered in the context of the big deal," added a top Democratic source briefed on the deliberations.

Multiple efforts to get comment from the White House were unsuccessful. That said, the president made his willingness to put entitlements on the table and incur the wrath of his base a focal point of his Monday press conference.

"We keep on talking about this stuff and we have these high-minded pronouncements about how we've got to get control of the deficit and how we owe it to our children and our grandchildren," said Obama. "Well, let's step up. Let's do it. I'm prepared to do it. I'm prepared to take on significant heat from my party to get something done. And I expect the other side should be willing to do the same thing -- if they mean what they say that this is important."

A proposal to raise the eligibility age for Medicare -- which was part of a budget plan put forth by Sens. Joseph Lieberman (I-Conn) and Tom Coburn (R-Okla.) -- would face steep opposition from within the Democratic Party. The amount of money it would save is also relatively small, as the vast majority of Medicare funding is spent on more elderly populations. The Congressional Budget Office has estimated that if the Medicare eligibility age was increased from 65 to 67, the federal government would save $124.8 billion between 2014 and 2021.

Obama's willingness to embrace the idea, however, was seen as a major bargaining chip that could help win concessions from Republicans on revenues.

The frameworks of the deal were as follows: In exchange for raising the Medicare retirement age (in addition to other entitlement reforms and cuts that together would add up to $3 trillion), GOP leadership would sign off on $800 billion to $1 trillion in revenue raisers. Those increases, however, would only come in 2013. Republicans would have their choice of poison too. Either they could craft and pass a sweeping package of tax reforms that would result in $800 billion to $1 trillion in revenue increases, or they would be forced to de-couple the Bush era tax cuts, allowing those for people making above $250,000 to expire.

The idea, as one Democratic source with knowledge of the discussions put it, was to give House Speaker John Boehner (R-Ohio) both an "out" and an "incentive." He would be able to go back to his caucus and say he had prevented an immediate tax increase and, potentially, the elimination of some of the Bush tax cuts. He would also be able to argue that he had created the proper conditions for tax reform. In order to ensure that he followed through, however, the prospect of the upper-end rates rising loomed in the near future.

"If the likes of [Senate Minority Leader Mitch] McConnell and others were blocking tax reform in a way that made up the $800 billion or so that needed to be actualized, Democrats would have that as a fallback if nothing happened at the end of 2012," explained the source.

The deal fell apart, in part, because Democrats demanded an upfront commitment from Republicans that they would allow the Bush-era tax cuts to be decoupled, rather than a commitment to revisit the issue at the end of 2013. According to a GOP official, that demand was interpreted as a way to simply drag out negotiations on comprehensive tax reform, as Democratic leadership would know full well that they had the fallback option of allowing taxes on upper income Americans to revert to pre-Bush rates.

Ryan Grim contributed reporting.

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