NSW Premier Mike Baird is among those leading the charge to restore the funding and has the backing of the Labor states.

South Australia said that if the Abbott government was unprepared or unable to hand back the money, it would consider restoring state taxes, such as the Financial Institutions Duty, a tax on bank deposits which was abolished on July 1, 2001, as part of the GST deal between the states and the Commonwealth.

South Australian Premier Jay Weatherill said he and other Labor premiers would never countenance an increase to the rate or base of the GST because they regarded it as a regressive tax that would hurt those on low incomes.

"They're asking for the GST. There are many things to look at before you look at GST, like superannuation [tax breaks] and financial institutions," he said, nominating the reintroduction of the FID. "I'm prepared to put that on the table."

In the budget, the government scrapped the National Health Reform Agreement the states signed with Canberra in 2012 with the aim of "generating momentum for longer-term reforms" to be considered as part of the white papers on tax and federation.

It reduced the rate of growth in federal health spending by "adopting sensible indexation arrangements" in which increases would be tied to inflation and population growth. In addition, the federal budget abolished a number of national partnership agreements providing extra health funds.

The cuts cost the SA health budget $275 million in 2017-18, after which they will accelerate rapidly, Mr Weatherill said.

NSW lost $1 billion over the first four years but managed to offset much of it through efficiency measures. But NSW Treasurer Gladys Berejiklian said NSW's losses would accelerate dramatically towards the end of the new budget cycle and beyond.


"We said at the time this was going to result in significant challenges for the NSW budget going forward, and this remains the case," she said.

Victoria set to lose $13b: Hennessy

Victorian Health Minister Jill Hennessy said as a result of all the cuts, Victoria stands to lose $13 billion in hospital funding over the next decade.

"The federal government needs to play its part and appropriately fund Victoria's hospitals to reduce waiting times and improve services for Victorian patients," she said.

Chances of an increase to the rate or base of the GST appear hopeless, with the federal government refusing to move unless there is blanket support at state and federal levels.

"Clearly there is no bipartisan support so that's the end of the matter," federal Treasurer Joe Hockey said on Monday.

Mr Abbott wants the dominant issue at Friday's meeting to be his idea for a national approach to combating domestic violence, including agreement to establish a national Domestic Violence Order scheme.

But apart from the health fund dispute, the escalating fight caused by Western Australia's demand for more GST revenue shows no sign of abating.


Cabinet divided

The issue has divided the federal cabinet with non-WA ministers unsympathetic to calls by Mr Hockey and WA-based Finance Minister Mathias Cormann for WA to be spared from its GST revenue share falling below 30¢ in the dollar.

Not one single state or territory supports WA's push, which would come at the expense of their own revenue. On Monday, the issue caused Senator Cormann to use Twitter to attack Victorian Premier Daniel Andrews, who had told the WA government to "stop spending like drunken sailors".

Senator Cormann pointed to the possibility of Victoria being hit with a $1.5 billion fee to cancel the East-West Link road project.

"This from a guy who spends $1.5 billion not to build a road," he tweeted.

Mr Abbott has washed his hands of the matter, saying it was up to the states to agree on how to carve up the GST. WA Premier Colin Barnett has threatened to stop co-operating with the Federation.

The federal government is in an invidious position, having to choose between angering WA, a traditional support base in which its fortunes are declining, or anger the rest of the country. On the weekend, Senator Cormann said the current GST distribution should be frozen at this year's levels so WA at least received 38¢ in the dollar, rather than falling to 29.9¢ next year.