The NSW government will tip nearly $20 billion into public hospitals, mental health services and medical research, but medical groups warn it will fall short of what is needed to meet growing demand.

People waiting for elective surgery will be among the first to be affected.

The government will boost health spending by 5.2 per cent, which is almost two per cent short of what it has previously accepted is the amount required to keep pace with "health inflation".

An ageing population and wider prevalence of chronic disease, along with more advanced technology, drive health costs up by about 7 per cent each year.

The budget caters for an additional 90,000 emergency department attendances and 40,000 extra admissions at a cost of $325 million, devotes $9.3 million to specialised nursing positions and allocates five pediatric general surgeons to undertake routine work at local hospitals.

It also removes the co-payment for certain drugs dispensed by public hospital pharmacies, which will save money for patients with cancer and chronic diseases such as HIV, Alzheimer's disease and cystic fibrosis.

Health Minister Jillian Skinner said the 2015-16 budget would deliver on its election commitments.

"The NSW Government will fund record activity in our hospitals, bolster our clinical workforce and continue our massive hospital building program," Mrs Skinner said.

The Commonwealth government will reduce its contribution to hospital funding growth from 2017, forcing the states to pick up the difference.

Australian Medical Association NSW president Saxon Smith said the fiscal gap created when federal funding dries up will exceed the equivalent of Westmead Hospital's entire operational budget within three years.

"Our big concern is the cliff facing us in two years when the federal funding starts to fall off," AMA NSW president Saxon SMith said.

"You can understand why the government has gone with a steady-as-she-goes budget. You can't plan the services you need when you know the federal government is going to pull the rug out from under you."

The government will spend $5 billion over four years on building and expanding its most decrepit public hospitals, including Blacktown Hospital where emergency departments have left patients for days.

But it has delayed plans to upgrade Nepean Hospital, where four out of 10 patients wait longer than four hours to be treated in emergency.

Opposition health spokesman Walt Secord said this was unacceptable for Western Sydney, which was in the midst of a baby boom and where waiting times were among the longest in NSW.

"This is a major, major broken promise," Mr Secord said.

"Nepean Hospital is one of the hospitals that are under pressure. It's one of the first places you would proceed with an upgrade."

Mrs Skinner said a major upgrade of Nepean Hospital had already been completed and the government would invest $4 million on planning a new upgrade in its current term.