Prime Minister Julia Gillard has accused Victorian Premier Baillieu of dishonest politics in his accusation of a shortfall of Federal health funding.

Ms Gillard announced that the Federal Government’s $900 million in health funding would continue, but took the opportunity to blast Mr Baillieu for cutting state health funding.

The Victorian and Federal Governments have been involved in a long running feud over $107 million in funding that was cut, resulting in bed closures and blowouts in surgery waiting times. Ms Gillard said the changes to funding was an automatic adjustment made following revised population figures.

Ms Gillard announced that the funding would now be delivered directly to local hospital networks, and that it won’t pass through State Government hands.

The Prime Minister announced that the $107 million would be raised from cutting funding to a rewards program that the Victorian Government hoped to receive.