A fresh fight over the future of health funding is brewing ahead of a meeting of national cabinet later this week.
Premiers and chief ministers are expected to ask Prime Minister Anthony Albanese to provide a funding boost for public hospitals given rising inflation and the ongoing cost of Covid-19.
Currently, there is a 6.5 per cent annual cap on the funding for public hospital services. It limits the Commonwealth increase to about $2bn a year.
But the states want a funding package that exceeds that cap until June 30, 2025.
Speaking with ABC Radio National on Wednesday, the federal Health Minister suggested the government would not bend to the demands.
“There are substantial constraints on hospital activity right now, mainly due to workforce,” Mark Butler said.
“The advice I have is not that we‘re going to breach the 6.5 per cent cap, but we’ve also made sure that hospitals are in a good position over the course of the rest of the year to deal with the increase in Covid activity.”
Earlier this year, the Prime Minister gave the 50-50 public hospital funding agreement for Covid costs a three-month lifeline.
Mr Butler said that deal, due to expire at the end of the month, had been extended to the end of the year.
But state leaders on Friday are expected to push for that to be extended until next June.
The fight comes after Treasurer Jim Chalmers flagged health as one of the five areas placing the most stress on the budget.
A review into health funding by Prime Minister and Cabinet, was announced in June.