Kristina Keneally has thrown more obstacles into Kevin Rudd's path to health reform, refusing to hand over control of GST funds and demanding an extra $700 million sweetener.
Her demands will make it even harder for the prime minister to win the day at the Council of Australian Governments (COAG) meeting next week.
After a meeting of her cabinet on Friday, the NSW premier indicated she was 90 per cent behind Mr Rudd's ambitious plan to make over the health and hospital system.
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Three sticking points
But there are three significant issues on which they don't see eye to eye.
Ms Keneally, who was chairing a phone hook-up of state and territory leaders on Friday afternoon, urged other leaders to go into COAG in a spirit of co-operation.
"This isn't me saying it's `my way or the highway' ... there is room to negotiate here," she told Sky News.
Further negotiations are expected, involving Mr Rudd and the states as well as among the premiers throughout the weekend.
Mr Rudd wants the states and territories to sign up to a deal that would see them hand over 30 per cent of GST revenues. In return, the commonwealth would take over majority - 60 per cent - funding of public hospitals.
$3 billion worth of sweeteners
The commonwealth plan would see the federal government channel funds directly to local hospital networks, which will be in control of facilities in their catchment area.
Mr Rudd has added an additional $3 billion in sweeteners - including money for doctor training, elective surgery, emergency departments - to win over the states and territories.
Ms Keneally remains positive about a deal ahead of the Monday meeting but maintains that she won't do anything to disadvantage her state.
"NSW understands that in any discussion, there needs to be flexibility in working together to achieve a successful outcome," she said.
Negotiate on 'best outcome'
"We go into the COAG on Monday prepared to negotiate the best possible outcome for the people of NSW.
"But I will not sign up to a deal that disadvantages NSW taxpayers.
Ms Keneally sees three key issues for negotiation: handing over GST revenue to the commonwealth; a single funding pool for each state and territory; and more money for NSW.
She estimates her state will need $686 million to pay for initiatives proposed by the commonwealth in elective surgery and emergency departments.
Despite the roadblocks he faces, Mr Rudd was maintaining his all-or-nothing demands on Friday.
Victorian Premier John Brumby, the fiercest critic of the Rudd plan, has proposed settling on an in-principle agreement on Monday, with the details to be sorted out within a four- to six-week period.
'Tired of excuses'
As far as the prime minister is concerned, that idea is not on the table.
"I think the Australian people have grown a bit tired of more and more excuses for delay."
He repeated that he wasn't prepared to offer a blank cheque to premiers on Monday.
"Next Monday in Canberra we don't want simply a plan for another blank cheque for the states," Mr Rudd said.
