Health Minister Tony Abbott yesterday accused the commonwealth of bankrolling public hospitals but having no control over how the public money was spent.
He attacked state governments calling them "institutionalised beggars" and blame-shifters who should be able to fund public hospitals using the "river of gold" of GST receipts.
State health ministers, outraged at Mr Abbott's position accused him of short-changing public hospitals and favoring private hospitals instead.
The minister's comments came ahead of negotiations for the next five-year commonwealth-state health funding agreement worth $42billion over five year which expires in the middle of 2008.
According to Mr. Abbott the current agreement was unsatisfactory.
He said,"Essentially you should have authority over the system commensurate with the level of funding responsibility that you've got."
While Mr Abbot went on to explain that he was not suggesting a commonwealth takeover of public hospitals, a proposal he has floated in the past but flatly rejected by John Howard he explained that he was tired of blame-shifting by states.
He said, "How can you be a responsible sovereign government if someone else always has to fix you up? We aren't going to do more (for public hospitals) given that under the GST arrangements they have this river of gold flowing into their coffers."
With this move the commonwealth could demand states reduce waiting lists or introduce preventive health measures.
Health economist John Deeble, the father of Medicare, said the shortages of doctors had caused increases in wage bills, which were hurting the states because the current agreement was linked to increases in the minimum wage, which were smaller.
Professor Deeble said, "The commonwealth owes the states about $500 million a year - the difference between a 50-50 split of costs and the actual situation. It will be up to $800 million a year by the end of the current agreement."
Federal Labor health spokeswoman Julia Gillard said, "The growth rate on hospital funding by the commonwealth in no way matches the growth rate of the states."