Victorian Premier John Brumby last thursday sought to trump Mr Rudd's offer to take responsibility for 60 per cent of state hospital funding in return for taking 30 per cent of GST revenues, with a demand for a 50-50 split that would leave the states in control of public hospitals.

Mr Brumby, who represents the nation's second-most populous state, which has what is widely regarded as the best hospital system, questioned Mr Rudd's promises of extra funding for public hospitals. He said the federal plan would increase the commonwealth's share of total hospital funding by only one percentage point to 42 per cent, not the 60 per cent claimed by the Prime Minister. That figure included recycled GST revenue.

Mr Brumby said three-quarters of the benefits to the health system would not arrive until 2017 and Canberra's plan to fund local hospital networks directly would create a parallel commonwealth bureaucracy.

But Mr Rudd stood firm, and federal government sources last night remained confident of securing a deal at the April 19 Council of Australian Governments meeting, arguing that Mr Brumby was posturing and other premiers were keen to access the funding on offer in Mr Rudd's $50bn plan.

As Prime Minister, I was elected with a mandate to deliver better health and hospital services for all Australians, Mr Rudd said.

The release of Mr Brumby's plan came after both the Queensland and West Australian governments this week expressed confidence that a deal would be reached.

The move came after the Victorian branch of the AMA said Mr Rudd's plan to assume more control of hospital funding by clawing back 30 per cent of GST revenue from the states would leave Victoria's health system and its taxpayers worse off.

Mr Brumby's challenge risks fundamentally undermining Mr Rudd's plan, heightening the chance that the Prime Minister would be forced to make good his threat to hold a referendum to take over the health system and go to a federal election with health at its core.

In releasing his blueprint, Mr Brumby challenged Mr Rudd to release further details of his plans for aged care, emergency medicine and primary-care funding.

All of the modelling we have done shows there is just nothing in this for Victorian patients, Mr Brumby said. There is no extra money. All that is happening is a recycling of the GST . . . So I think you are going to find a number of states have great difficulty in handing over one of their taxes to the commonwealth, who recycles it back with their label on it.

Mr Brumby's rejection comes after three separate meetings with Mr Rudd on the issue, which failed to produce an agreement on funding.

NSW Premier Kristina Keneally backed Mr Brumby's call for pooled health funds and called for an immediate funding increase for public hospitals.

She said an agreement was possible at COAG, but we must ensure that there's additional money coming into the health system, not just in four years' time, but more quickly.

Mr Rudd, visiting Rockhampton in Queensland, said people expected reform.

Working families, pensioners, carers, have all reached a conclusion that the current system doesn't work because state governments can't afford to fund it in the future . . . That's why the Australian government is stepping in to become the dominant funder of the public hospital system for the future. The Australian government must be the dominant funder for the future.