The government says it's not considering a radical overhaul of the way the Commonwealth funds hospitals after reports that officials are working on a plan.
A plan to strip Commonwealth cash from public hospitals and force patients to pay more for coverage will never be government policy, the health minister has vowed, as Labor prepares to grill officials over the proposal.
Health Minister Greg Hunt says he has already rejected a plan to radically overhaul hospital funding outlined in documents obtained by Fairfax Media, and would do the same it the idea was ever floated again.
"The story does not reflect government policy. It will not be government policy. It will never be government policy," Mr Hunt told reporters in Canberra on Monday.
Bureaucrats have considered a "commonwealth hospital benefit" plan that would pool all funds the federal government now provides for public hospitals, private sector doctors and health insurance rebates and use it to pay a standard amount for services regardless of whether patients were in public or private hospitals.
Under existing arrangements the commonwealth pays close to 40 per cent of the cost of public hospitals.
The department's presentation to the taskforce suggests that would be reduced to 35 per cent under the proposed scheme.
The plan has been discussed by a taskforce, being run by a private strategic policy think tank Global Access Partners, but is not yet government policy.
Mr Hunt said the proposal pre-dates his time as minister.
"I know that the issue was raised with me coming out of officials meetings with the states as a possible item for COAG and I struck it out," he said.
"I've rejected it once. If it ever comes forward, I'll reject it again."
Labor senator Murray Watt, who will quiz senior health department officials during a Senate hearing on Monday, says the reports are extremely disturbing.
"We know Malcolm Turnbull and the Liberal Party have form when it comes to cutting Medicare and cutting funding to public hospitals," he said.
"If those reports are accurate then this seems to have been a very detailed piece of work and we'll be very interested in asking about it."
Opposition health spokeswoman Catherine King said the revelation was typical of the way the coalition did business.
"This is the nature of this government, deals in secret, beavers away ... in the background and then presents it to the states and territories as though it's a fait accompli," she said.
Finance Minister Mathias Cormann insists there is nothing to see.
"There's no secret taskforce, no secret plan," he told reporters in Canberra on Monday.