WASHINGTON – New York’s two Democratic senators are casting President Bush’s proposal to limit by two tenths of a percentage point the automatic annual growth of federal Medicare spending as a crushing blow to New York’s health care system – firming up support from the state’s vast health care lobby and frustrating budget hawks who called the plan cosmetic.

Mr. Bush’s proposal to lower reimbursement levels on medical services, among other measures, is expected to save the government $36 billion over the next five years and more than $100 billion over the next decade. The administration has argued that new technologies enable doctors to provide care for less than the government now pays out in reimbursements, and the budget acts on that principle by dropping to 7.5% Medicare’s automatic annual 7.7% increase.

“This budget reforms Medicare without reducing benefits to seniors or the disabled,” a spokesman for the Office of Management and Budget, Alex Conant, said. “The proposal focuses most of the anticipated savings from Medicare by making sure doctors and hospitals pass on to American taxpayers the savings they enjoy from greater productivity and efficiency.”

Yet Mr. Bush’s plan to limit growth in the program, which now accounts for more than 10% of the entire federal budget, was met with grim pronouncements by Senators Schumer and Clinton. Hours after Mr. Bush released the budget, Mr. Schumer issued an analysis that zeroed in on health care spending. Mr. Schumer said the Medicare proposal endangers access to health care by seniors.

Mrs. Clinton cited the proposal in a conference call with reporters, then followed it up with a fundraising letter from her political action committee, Friends of Hillary, which characterized Mr. Bush’s budget as “another big step toward remaking America as this administration wants to see it.” The letter, signed by the committee’s communications director, Ann Lewis, said that no area of the budget was hit harder than health care.

“The Bush Administration proposes $36 billion in cuts to Medicare during the next five years – $105 billion in a decade. That means even more problems for those seniors now struggling with the Republican drug plan, which has brought so much confusion and hardship!”

The Lewis letter added “Hospitals – already squeezed by the soaring cost of drugs and the rising costs of technology – will be squeezed once again as their reimbursement rates are reduced in the new Bush budget.”

Health care unions and trade associations have also decried the Bush proposal, raising the possibility of hospital closings and layoffs. Pointing to additional reductions on the state level that were proposed earlier this year by Governor Pataki, the president of the Greater New York Hospital Association, Kenneth Raske, called Mr. Bush’s plan “devastating.”

“Combined with hundreds of millions in proposed Medicaid cuts at the state level, and with New York hospitals losing money for seven straight years, these Medicare cuts would simply be devastating,” Mr. Raske said. “There is little question that we’d see cutbacks in service, layoffs of key personnel, and more hospital closings.”

Budget analysts acknowledged that the proposals, which are expected to face resistance in Congress, will put increased pressure on hospitals and other medical service providers in New York. According to figures compiled by the Greater New York Hospital Association, more than half of New York’s nursing homes and certified home health agencies are losing money already. Under the president’s plan, Medicare payments to hospitals in the state are expected to be $700 million less than they would be otherwise over a five-year period.

Overall, though, budget hawks and health care analysts described Mr. Bush’s proposal as a very small step toward taming a health care entitlement program that each year consumes a greater share of the federal budget. Asked about Mr. Bush’s proposal, a senior fellow at the Manhattan Institute, David Gratzer, urged perspective. He said the program, projected to cost the federal government $390 billion in the coming fiscal year and $405 billion the year after that, needs much more than a “haircut” of $35 billion over five years.

“One of the first things the president of the United States did when he came to office was to change the license plates on his limousine because Clinton had put a particular style of plate on it he didn’t like,” Mr. Gratzer said. “I have no opinion about that either. I mean, I wouldn’t say this proposal is totally inconsequential, but I might come close to saying that.”

A former lieutenant governor of New York who has become a champion of health care reform in the state, Betsy McCaughey, said she is more pleased with a proposal in Mr. Bush’s budget allowing residents to buy insurance out of state. She also hailed a new state law requiring hospitals to report infection rates. Ms. McCaughey said reporting infections, if enacted nationwide, could save the government $30.5 billion annually.

“Clean hospitals will save lives and reduce needless spending,” Mrs. Mc-Caughey said.

A New York Times story last year estimated that 10% of New York’s $45 billion Medicaid program, which draws half its funding from the federal government, goes to fraudulent claims. State legislators vowed at the time to increase vigilance over the program. Mr. Conant said Mr. Bush’s proposal is aimed at forcing hospitals to bring costs in line with market prices. He also noted that President Clinton signed a law that did much the same thing in 1997.

In the 1990s, when Republicans in Congress attempted to restrain the growth in Medicare, public employee unions ran ads featuring gray-haired actors that essentially accused the Republicans of cutting health care to grandparents. Republicans derided the tactic as “Medi-Scare” and wore buttons emphasizing the increase in dollars year to year, arguing that the increases meant the program was not being “cut,” as the Democrats claimed.