Gillard gets tough in row over state's health funding

Tough talking: Prime Minister - Julia Gillard

Prime Minister, Julia Gillard has said the Federal Government may take over funding of local hospitals amid a new row over state health budgets. 

The row erupted following a feud between the Commonwealth and the Victoria State Governments over a cut of $107 million from the state's allocation of health funding. 

The funding cut saw hospital bed closure

According to Ms Gillard the funding adjustment was based on revised population figures. And in a letter to the Victorian Premier, Ted Baillieu, Ms Gillard said the money will now be distributed direct to the hospital networks and would bypass the Premier altogether. 

"What we intend to do to balance the books is to cut $107 million off other sources of funding to the Victoria Government," the Prime Minister said. 

According to Ms Gillard the Victoria Government will lose $55 million in reward funding that it would have received under national economic reforms, with the remaining money to be recouped through cuts to other grants. 

However, Mr Baillieu described the population figures as "dodgy" and said that the $107 million is only a short term political fix. 

Speaking to Fairfax Radio Mr Baillieu said: "The $107 million only covers the financial year, so from July 1st the cuts that were previously announced will resume and there is a further $368 million of cuts in Victoria in the (forward estimates)".

The problem is also threatening to spread to other states including Queensland, which has demanded that the Commonwealth reverse a previous cut of $103 million in its allocation. 

Prime Minister Gillard has forwarded on similar warning letters to all state premiers telling them that they will suffer the same fate as Victoria if they engage in "game playing" over health funding.

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