Patients could cop the brunt of a $57 billion hospital funding shortfall that lies behind the miraculous budget turnaround projected by Joe Hockey in the Intergenerational Report.

The yawning funding gap, that threatens to blow out state budgets as well as hospital waiting lists, will be central to the Abbott government's looming white paper on federalism, which NSW Premier Mike Baird insists must be used to resolve the problem.

Treasurer Joe Hockey, Prime Minister Tony Abbott and NSW Premier Mike Baird. Credit:Edwina Pickles

The Abbott government is booking savings of $57 billion over 10 years as a result of dismantling the hospital funding system put in place by Labor, and from 2017 moving to a new system in which states receive block grants that are adjusted for population growth and inflation as measured by the consumer price index.

The Victorian government says it stands to lose around $13 billion over the next 10 years, but Victorian Treasurer Tim Pallas said this week he would not push for an increase in the GST to fund the shortfall.