In the aftermath of a fierce budget battle that threatened to shut down the government, President Obama presented a deficit reduction plan outlining how he would tackle what could arguably be called the greatest threat to America’s security—our country’s long-term debt. In a speech to students at George Washington University, he advocated government cuts across the border using a scalpel rather than a machete to trim the country’s mounting debt by $4 trillion in 12 years or less, including cuts in Medicare and Medicaid spending.

Building on $1 trillion in savings projected to stem from passage of the Patient Protection and Affordable Care Act, Obama says he plans to reduce wasteful subsidies and erroneous payments, cut spending on prescription drugs by leveraging Medicare’s purchasing power—a tool he had relinquished to get pharmaceutical industry support for health care reform—and, speed the approval of generic medicines.

His framework also calls for speeding up the availability of generic biologics and prohibiting “pay for delay” agreements between brand-name firms and generics companies.

Another important part of Obama’s plan for reducing health care costs is to strengthen the Independent Payment Advisory Board, a group set up by the Affordable Care Act, to make sure Medicare remains sound and solvent. Under current regulations, if the Medicare growth per beneficiary exceeds nominal GDP plus one percent, the board makes cost-cutting recommendations to Congress to reduce the rate of growth, which Congress must consider or match with policies that achieve equivalent savings. Obama wants to reduce this cap to GDP plus 0.5 percent.

Obama claims that his framework will save $480 billion by 2023 and at least an additional $1 trillion over the subsequent decade, and that the total savings in his proposal are substantially the same as a Republican proposal made by House Budget Committee Chairman Paul Ryan in November 2010.

But unlike the House Republican plan, which Obama says lowers the government’s healthcare bill by transferring costs to seniors and poor families, the president says his proposal will reduce government costs by reducing the cost of health care. His plan also calls for changing the way healthcare is paid for,by giving doctors and hospitals incentives for improved results instead of paying for the number of procedures.

“We will reform these programs (Medicare and Medicaid), but we will not abandon the fundamental commitment this country has kept for generations,” said Obama.