The Premier, Barry O'Farrell, is warning of emergency room bed closures and cuts to education and other services if the Gillard government fails to renew funding agreements that begin to expire from next June.
But the federal Treasurer, Wayne Swan, has accused Mr O'Farrell of seeking to "lie and mislead people", arguing that an agreement between the commonwealth and the states already guarantees no state will be worse off in terms of health funding.
The federal government provides about $800 million in funding each year for health, education and other services under the system of National Partnership Agreements negotiated with the states.
The NSW president of the Australian Medical Association, Brian Owler, said in yesterday's Herald that the association understood that federal government had yet to commit to the "vast majority" of the funding from 2014.
Dr Owler warned that failure to do so in health would "leave a gaping hole in the NSW Health budget and result in cuts to crucial patient services."
Mr O'Farrell called on the federal government to commit to continuing the payments.
"Without these funds, beds will close," he said. "That means people will wait longer for elective surgery, people will wait for longer in emergency departments and wards will close — it's as simple as that."
In its submission to Mr Swan, NSW warns of the closure of 69 medical assessment beds which treat on average 17,000 patients per year in emergency departments and up to 161 acute care beds across 26 sites in NSW.
But Mr Swan pointed out that the National Health Reform Agreement signed by Mr O'Farrell states that "no state will be worse off in the short or long term" in terms of health funding."
"This is a monumental stuff up from Barry O'Farrell. He has called on the federal government to guarantee hospital funding — and we have done exactly that, in an agreement that he has personally signed," Mr Swan said.
"This is the Liberal way — Barry O'Farrell and [federal opposition leader] Tony Abbott will lie and mislead to scare the pants off people, but they can't argue with the facts."