The states have slammed reports the federal government is considering leaving the funding of public hospitals to the states.
The option, contained in a leaked discussion paper on federation reform, could cost the states and territories $18bn a year.
It also comes after options to change school funding, including a means test on public school education, were leaked and then swiftly ruled out by the federal government.
The Queensland premier, Annastacia Palaszczuk, said both the leak and the proposal “ripping billions of dollars out of the health system” were unacceptable.
“This is simply not on,” she said. “How can we have a constructive, responsible discussion next month at Coag when Tony Abbott’s leaked information tells us he wants to the states to pick up the shortfall. I’m quite sure that my colleagues around the states and the first ministers will not put up with this.”
Palaszczuk denied playing politics with the proposal, which could potentially leave states better off financially if they were allowed to broaden their tax base.
“I am going to look at what’s on the table when we have this Coag meeting, but I will always stand up for Queensland and I don’t want to see any disadvantage to any Queensland family,” the premier said.
She added that the federal government was clearly “in shambles” after two discussion paper leaks in two days.
The Queensland opposition leader, Lawrence Springborg, said the health funding proposal as it stood would not be something the Liberal National party would support and would fly in the face of recent increases to commonwealth funding.
However, he said he hadn’t seen the whole proposal and if there were revenue offsets or other income options available to states it could be something worth considering.
Daniel Andrews, the Victorian premier, said any move to strip more federal money out of the state health system would be fought hard at meeting of leaders in July.
While he is open to conversations about health system changes he fears funding cuts would hurt patients.
“Tony Abbott said no cuts to health before the election and now he wants patients, and it would seem state governments, to pay for his lie,” Andrews said.
The South Australian premier, Jay Weatherill, said that while state and federal ties could be loosened when it came to education, hospital funding required deep cooperation because of the way the health system was “intermeshed”, he said.
“I’d be worried about any funding arrangement that meant the commonwealth could essentially wipe its hands of what they regard as state responsibilities in the public health care system,” he told ABC Radio.
“There is no model of us just keeping out of each other’s way and doing our own thing, it requires a cooperation.”
The New South Wales budget revealed the extent of the federal government’s cuts in funding for health and education, which were done by reducing the funding growth rate. The NSW government expects to lose $26bn from its bottom line in the next decade.
The state’s treasurer, Gladys Berejiklian, said the reductions in funding were not sustainable for NSW.
“We’re looking forward to genuine and productive discussion, not just with the federal government but with the other states,” Berejiklian said.
“There’s no doubt what is being proposed, which hits our budget in 2017, isn’t sustainable as far as we’re concerned, we’ve been extremely up front about that and we have welcomed the opportunity to talk about that with the federal government but also having discussions about broader tax reform.”
Asked what the NSW government would do if the federal government refused to budge on the issue, Berejiklian said she would cross that path when she came to it.
Federal Labor frontbencher Mark Butler said the complete withdrawal of commonwealth funding would devastate public hospitals and leave Australia with a “two-tiered US-style health system”.
“Tony Abbott is shaping up for the biggest smash and grab on Australia’s schools and hospitals ever seen in this country,” he said in Canberra.
But federal Liberal MP Angus Taylor said hospital and school funding were matters for the states. “There is no plan for the federal government to exit those areas,” he said.
Nationals MP Andrew Broad said the government’s approach to federation reform was wise. “Everything should be on the table,” he said.
Australian Associated Press contributed to this report