Prime Minister Prayut Chan-o-cha has branded the universal healthcare scheme a "costly populist" policy which helped deposed prime minister Thaksin Shinawatra win the 2001 election.
The health scheme benefits about 47 million people - two-thirds of the population.
Commenting on the conflict between the National Health Security Office (NHSO) and the Public Health Ministry, Gen Prayut said Wednesday that Thailand is not financially ready for such a multi-billion-baht health insurance project.
It will "bankrupt a lot of hospitals in the next few years", he said.
"The universal healthcare scheme is a populist project. Though people are benefiting from it, is Thailand ready for it? Why aren't 190 other countries doing it? Only a few countries have done it," Gen Prayut said.
The 30-baht scheme was among several populist policies that helped Thaksin and his now-defunct Thai Rak Thai Party win a landslide election victory in 2001.
The NHSO was set up to oversee the scheme with an initial payment of 1,250 baht per person to fund it.
Though the per-head payment is set at 3,028 baht for the 2016 fiscal year, Gen Prayut said the amount is not enough for hospitals to cover their costs.
He added he would not abolish the scheme, but would seek ways of increasing funding.
Supporters of the scheme criticised his remarks, saying the scheme did a good job of improving access to healthcare. "The existing system is fine, but the government can't find the money to finance it," Sureerat Trimakka, coordinator for the People's Health System Movement told the Bangkok Post.
"This government is making the national health system a scapegoat."
Meanwhile, government sources say Public Health Minister Rajata Rajatanavin has 15 days to decide what to do with suspended permanent secretary for public health Narong Sahametapat after a panel cleared him of any wrongdoing in the dispute with the NHSO over the management of the universal healthcare scheme.