President Bush proposes to cut the projected growth of Medicare by $2.5 billion next year and by $35.9 billion from 2007 to 2011, mostly by reducing the annual inflation updates that hospitals and other health care providers receive.

Medicare would still grow rapidly: 7.7 percent a year under the president's budget, compared with 8.1 percent under current law. 

Health care providers are already mobilizing a campaign to block the president's proposals. In an election year, they appear to have a reasonable chance of succeeding. They contend that the proposals would hurt many of the 42 million beneficiaries.

Mr. Bush would give hospitals and hospices less than a full inflation update in each of the next three years. He would freeze Medicare payment rates for skilled nursing homes and home health agencies in 2007, then reduce the inflation allowances they would otherwise receive in the next two years.

The White House contends that health care providers can live with the cutbacks if they become more productive. But William D. Novelli, chief executive of AARP, warned that the proposals could lead to "a crisis in quality and access to health care for older Americans."

Mr. Bush proposed a major new tool to cut the growth of Medicare. If general revenues exceed 45 percent of Medicare spending in any year, payments to health care providers would be automatically cut by four-tenths of 1 percent. If Congress failed to act, the cuts would become deeper. Payments would be reduced by an additional four-tenths of 1 percent every year in which the threshold was exceeded.

This mechanism is intended to prod Congress to take action to slow the program's growth. Medicare is financed partly with payroll taxes and premiums, but it is relying to a larger degree on general revenues. 

Mr. Bush also proposed savings in Medicaid, the federal-state program for low-income people. Savings would total $783 million next year and $13.6 billion from 2007 to 2011. Mr. Bush said he would achieve most of the savings by limiting the ability of states to shift Medicaid costs to the federal government.

The president requested $80.6 billion in 2007 for the Department of Veterans Affairs, including $34.3 billion for health care programs. He proposed higher drug co-payments and new fees for middle-income veterans with no service-connected disabilities.