State and territory leaders have unenthusiastically accepted a $2.9 billion offer to patch up some of the hospital funding stripped out by the former Abbott government.
Prime Minister Malcolm Turnbull offered the extra cash to fund hospitals to 2020 during the Council of Australian Governments meeting in Canberra on Friday.
In return, the states will try to reduce demand for hospital services by giving chronically ill people better care to keep them out of wards.
It's a solution to what states and doctors warned would be a health crisis from July 2017, after the Abbott government stripped $7 billion from state hospitals out to 2020.
While acknowledging the extra funding was a "good first step", Queensland Premier Annastacia Palaszczuk said there was still a huge gap that would put a strain on hospitals.
"It will mean more work for our doctors, our nurses, our administrators," she told reporters after the COAG meeting.
Fellow Labor premier Daniel Andrews agreed the offer did not make up for the billions of dollars taken away from Victorian hospitals.
"There's no getting away from, or getting around, or politely explaining away the fact that billions of dollars will not be flowing to hospitals in my state," the Victorian premier said.
"(The cuts) are not reversed today and that's a really important point for us all to acknowledge."
Mr Turnbull wants governments to be more effective and innovative to provide services in the face of increasing demand and dwindling revenue, urging leaders to be "clear-eyed" in their choices.
But South Australian premier Jay Weatherill believes hospital expenditure is "locked and loaded".
"These people are coming into our hospitals," he told reporters.
"The real question is who bears the burden of actually meeting that need."
He wants a "substantial discussion" on increasing revenue, citing his proposal for a GST on financial services.
ACT Chief Minister Andrew Barr appreciates the prime minister's offer of $50 million for his government but says it's a long way off the $250 million that was cut from Canberra's hospitals.
"It's disappointing we have not properly resolved this matter," he said.
But Liberal NSW Premier Mike Baird believes the offer is "very fair and reasonable" and a "big step forward".
"The fiscal reality, look at (the federal government's) budget," he said.
"I mean, their budget is a massive challenge."
He believes the states now have enough funding for hospitals out to 2020 but warns of challenges in the following years.
Australian Medical Association president Brian Owler labelled the offer inadequate.
"People will wait longer and hospitals will be more overcrowded," he told Sky news.
