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Patients hurt by govt health plan: inquiry

State governments and health experts have come out swinging against the federal government's plan to slash public hospital funding.

The government's 2014/15 budget included plans to change the way it funds public hospitals from 2017/18, indexing it on population growth and the consumer price index.

Grattan Institute health program director Dr Stephen Duckett told a Senate inquiry in Melbourne on Wednesday the new model is flawed and unsustainable, accusing the government of breaking an election promise.

He says the budget did serious damage to federal-state relations and the confidence of states to plan and manage their health systems.

The breakdown came after the government walked away from the previous Labor government's national health reform agreement, entered into by all states and territories in 2011.

The Victorian Health Department's acting secretary Kym Peake said it is estimated the state will lose $17.7 billion in commonwealth funding over the next decade as a result.

She told the inquiry the new model removes incentives for both levels of government to keep people out of hospital and drive efficiency, and is forecast to deliver the lowest ever rate of commonwealth funding growth for hospitals.

Queensland Health Minister Cameron Dick, in a submission to a separate parliamentary inquiry, says the commonwealth cuts will rip almost $12 billion from the state by 2024/25.

He says the government's "reversals of commitments" in several areas has created uncertainty and had a negative impact on the ability of states and territories to improve health.

"It is not possible for the Queensland government to make up the shortfall resulting from reduction of funding of this magnitude," he said.

"This will lead to a decline in the quality and timeliness of services from July 1 2017."

Duckett is calling on the government to reverse its decision, accusing it of using "creative accounting" to describe the new funding model as a saving.

"They are simply a massive and unsustainable transfer of costs from the commonwealth budget to state budgets," he told Wednesday's hearing.

Treasury figures, revealed during a Senate estimates hearing, show the new funding model will take $57 billion out of public hospitals by 2024/25.

"If savings of this magnitude have to be absorbed by the states, then there would inevitably be a severe degradation of services to the public," Duckett said.

AMA Victoria president Anthony Bartone said the state's hospital system was already struggling with bulging elective surgery waiting lists and won't be able to cope when the federal government cuts take effect.

"The system will grind to a complete halt in my view," he said.

Health Minister Sussan Ley defended the plan, saying funding to public hospitals would increase by 20 per cent over the next four years or by almost $3.8 billion.

"Unsustainable health spending will cause Australians more harm than good in the long run and that is why I'm determined to ensure our health system, including public hospitals, is as efficient as possible," she said.

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