The Medicare cutbacks that President Bush proposed this week would eventually wring $1.2 billion a year from New York's troubled health care industry, cuts that would come as the state is already losing hospitals to wrenching changes in health care, industry officials said on Tuesday.

Health care spending is one of the driving engines of the economy of New York, which has some of the nation's premier teaching hospitals. But as Medicare and Medicaid costs have risen in recent years, federal and state officials have tried to rein in these costs, putting pressure on the local health care industry and helping result in the closings of several smaller hospitals. 

Representatives of New York's health care industry say that the latest cutbacks, proposed in the budget that the president sent Congress on Monday, would force hospitals, nursing homes and home care providers to reduce services for elderly and disabled residents of the state.

Health care officials say the proposed federal reductions - when combined with $431 million in annual Medicaid cuts that Gov. George E. Pataki recently proposed in his budget plan - are likely to result in more crowded clinics and emergency rooms in poorer communities, as well as higher bills for private insurers and patients themselves.

"The double whammy of the proposed cuts in Albany and Washington will have crippling impact on New York's health care system, forcing more hospitals to close and forcing the remaining hospitals to cut back services and increase personnel layoffs," said Kenneth E. Raske, the president of the Greater New York Hospital Association, a trade group.

When similar cuts have been proposed in past years, lawmakers have been able to get some of the money restored, and with midterm elections approaching, even some Republican leaders have expressed skepticism about the president's ability to carry out all the proposed cuts in the growth of Medicare. But with the program consuming an ever larger share of the federal budget, some of his proposals to rein in the cost of Medicare are likely to survive.

Mr. Bush is seeking to cut projected Medicare payments by $36 billion over the next five years, mostly through a reduction in the annual inflation adjustments that hospitals and other health care providers have traditionally received to cover year-to-year increases in costs.

The reductions in Medicare payments would be phased in gradually over five years. When fully carried out by the fifth year, the reductions in Medicare payments to New York hospitals would total about $711 million annually, according to a budget analysis by the hospital association. The reduction in payments to nursing homes and home care providers would total $450 million annually once they are fully phased in, according to the same analysis.

New York hospitals may share much of the responsibility for their predicament. Managed-care companies and government officials have long argued that New York's hospital industry is highly inefficient and that hospital administrators have been too quick to turn to the government for help. But industry leaders strongly dispute that assertion.

The hospital industry in New York is undergoing profound and painful changes. In the last decade, 33 hospitals across the state have been forced to close because of financial problems, according to the hospital association.
Even some of the president's Republican allies are beginning to express concern. One of them, Representative John E. Sweeney of New York, who is a member of the powerful House Appropriations Committee, said he agreed that there was a need to restrain federal spending but did not think that that goal should be met at the expense of hospitals.

"We need deficit reduction," he said. But he added that the proposed Medicare cut "disproportionately lays the burden on hospitals, and that has a devastating impact up and down New York."

Senator Charles E. Schumer, a Democrat from New York whose seat on the Finance Committee gives him a major role in the debate, said Republicans and Democrats on the committee were concerned about the proposed cut. "The only good news is that it is so deep and wide, and affects the whole nation, that we have a very decent chance of reversing a good part of it," he said of the president's proposal. 

But Gary Karr, a spokesman for the federal Centers for Medicare and Medicaid Services, said the president's plan was one of the recommendations of a panel Congress created in 1997 to look into ways of improving the program. "The aim of the president's budget is to keep Medicare's costs in line and to preserve the program and keep costs reasonable," he said.