Premier Chris Minns confirmed the change, saying part of the $750 million pledged by the former coalition government for palliative care would be shifted to the broader health budget.
In committing the money, then-premier Dominic Perrottet described it as the most important budget announcement he had ever made and an important countermeasure to passing voluntary euthanasia laws that he personally opposed.
"I want to have the best palliative care health system in the country, if not the world," he said at the time.
The coalition committed $743 million in the 2022/23 budget to help pay for an extra 600 palliative care doctors, nurses and health staff.
But Mr Minns said $150 million of the $750 million budget had been redirected within health.
"The main reason for that is the advice we got when we won is to push that much money into palliative care wouldn't work, mainly because we didn't have enough people to work in the sector," he told 2GB.
Mr Minns noted the overall palliative care budget would still be increasing by close to seven per cent this year and eight per cent the year after.
He said in many cases additional nurses would still be working in palliative care and geriatric care in NSW hospital wards.
Mr Minns said his government also had to find $98 million to pay for the voluntary assisted dying regime, which the previous coalition government had introduced without funding.
Opposition health spokesperson Matt Kean said the palliative care funding cut was "wrong and shameful", particularly when the Labor's government's first budget included billions in extra revenue that had been spent on pay rises for public servants.
"These savage cuts to end of life services will cause more suffering for dying patients and their families, his priorities are all wrong," he told AAP.
"(Mr Minns) had a $14 billion revenue windfall in this year's state budget, yet he couldn't find a single cent after paying off his union mates to support nurses with end-of-life care."
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