A federal government proposal to hand more money to the states to fund hospitals has nothing to do with the upcoming election, the health minister says.

Health Minister Sussan Ley denies the federal government's backflip on hospital funding is an election tactic.

Prime Minister Malcolm Turnbull has revealed a proposal to maintain activity-based funding and a national efficient price - the funding model established under the former Labor government that Tony Abbott planned to replace from July 2017.

Ms Ley denied any backflip, insisting it had been an evolution of policy to achieve reform and had nothing to do with the upcoming election.

"This is not about just getting through the election, this is about real reform," Ms Ley told the ABC on Wednesday.

She refused to reveal how much the states and territories will be offered when they meet in Canberra this week for the Council of Australian Governments (COAG) meeting.

She was also keeping mum on reports the federal government is considering allowing the states to set income tax rates in order to fund hospitals and schools.

She will meet with state and territory health ministers the week after COAG to discuss the reforms in more detail.

Businessman Tony Shepherd, who led the Abbott government's commission of audit, said allowing states to set income tax rates was a great reform that would reward states that grow quickly and give them more responsibility and authority when it comes to service delivery.

It would also stop the states from the yearly "demeaning, cap-in-hand" approach to the commonwealth for more money and allow them to adjust their income tax rate to raise funds.

He rejected suggestions it would create an imbalance between the states when it comes to tax rates or service delivery, insisting voters could be trusted to keep their governments in line.

"If you reduce the level of services too much - you'll get thrown out," he told ABC radio.

"If you increase your taxes too much - you'll get thrown out."