The White House budget to be unveiled on February 5 will include plans to expand means-testing in Medicare, the government-sponsored health insurance programme for the elderly, the Financial Times has learned.

The greater use of means-testing, which would require richer Americans to make a bigger contribution, will be accompanied by other steps to increase efficiency and bear down on Medicare costs.

The proposed Medicare changes form part of the White House plan to meet President George W. Bush's goal of eliminating the federal government deficit by 2012 while making his tax cuts permanent.

A senior administration official said the Medicare reforms set out in the budget would be "significant" though they would not add up to "unrealistic full-blown reform" of the programme.

He likened them to changes negotiated in 1997 as part of a bipartisan effort to balance the budget in five years.

The White House will also revise down its estimate of the underlying growth rate of Medicare costs, based on the lower than anticipated cost of the Medicare prescription drug benefit and new actuarial forecasts.

The administration expects that a combination of the policy reforms and slower growth in underlying costs will free up tens of billions of dollars annually by 2012 to help meet the zero deficit goal.

The official acknowledged that the administration had failed to win Congressional support for changes to Medicare in the recent past. However, he said the political context - with both parties now at least talking about balancing the budget by 2012 - has changed.

"I am not saying it is easy," he said. "But it is easier."

Stuart Butler, a policy expert at the Heritage Foundation, said "greater means-testing is the only way to contain the huge tsunami of Medicare spending that is scheduled for the next several decades."

The White House budget will also impose tight ceilings on growth in discretionary spending on non-security related programmes. However, in an effort to show that its budget plan is politically credible, the White House will not demand a nominal freeze in spending in these areas, as it did in last year's budget.

"We will show some flexibility," the official said.

This will involve budgeting for growth in total non-defence discretionary spending, though this will almost certainly be set below the expected rate of inflation.

Some defence costs included in supplemental budgets for the Iraq war will be brought into the administration�fs budget. But there will be no amount set aside for unforeseen military costs in 2012 and beyond.