Health Secretary Patricia Hewitt was heckled and booed by health workers as she tried to calm NHS job cuts fears.
Ms Hewitt told angry delegates at Unison's health conference in Gateshead reforms were needed to preserve the NHS as the union warned of strikes ahead.
Nurses, at their conference, called for job cuts and bed closures to be halted, and said a work to rule was possible.
Earlier, Tony Blair defended his NHS record despite more than 7,000 recent job cuts in England.
The NHS faces a predicted deficits of at least £600 million in England.
Praising the efforts of health care staff, Ms Hewitt repeated her weekend claims that the NHS had seen its best year so far.
She said despite the "stick" she had received for the claim she made no apology for it.
But her compliments and assurances were met with angry cries of derision and frequent interruptions from delegates.
She said she understood the concerns of those threatened with job losses but that change and reform was necessary if the founding ethics of the NHS were to be preserved.
Amid boos and murmurs from the crowd she said: "We've written a very big cheque for the NHS and we are proud of it.
"But it's not a blank cheque, it never has been and it never will be. Overspending hospitals and organisations do have to put their houses in order."
And after addressing the conference she faced a barrage of angry questions from Unison delegates who reeled off lists of ward closures and service cuts.
Earlier Unison general secretary Dave Prentis said his union would not stand by and watch staff suffer "in a climate of fear".
Unison would support members who had no option but to strike, he said adding that patients would be hit be the cuts.
"We are being told that somehow jobs will be disappeared or left unfilled without patients and staff feeling the pain - what utter nonsense."
If the prime minister is right in his assertion that things have massively improved since 1997, he has nothing to worry about
Meanwhile, nurses at their annual conference in Bournemouth called for an end to bed closures and job losses.
Royal College Nursing general secretary Dr Beverly Malone warned the government to start listening and stop treating nurses "like overheads to be cut" and said the success of reforms depended on nurses' goodwill.
"Believe me, right now, the ice that ministers are skating on doesn't come any thinner.... and it is melting fast."
She also told reporters that nurses may consider taking industrial action by not working unpaid overtime hours they regularly worked if the situation got worse and job cuts continued.
Dr Malone said: "Such action is always a last resort because nurses are always going to be looking at how to make sure patients are safe."
Speaking at his monthly press briefing, the prime minister admitted there were problems and challenges ahead for the NHS but called for a "sense of balance".
"There have been major, fundamental and lasting improvements in patient care over these past few years.
"The number of nurses is up, their pay is up and the numbers training is up," he added.
Mr Blair also said that Health Secretary Patricia Hewitt had his total confidence to drive through NHS reforms.
The prime minister's claims are backed up by the latest official figures which show the NHS workforce has increased steadily since Labour returned to power.
Numbers increased by 34,301 between September 2004 and 2005 to 1.3 million.
The Conservatives have called for Ms Hewitt to come to the House of Commons to make a statement on job cuts in the service.
And Liberal Democrat health spokesman Steve Webb said: "This is crisis management - the government is trying to sort out the problems of decades in weeks."