David Cameron has been described as "reckless" and "embarrassing" following reports he didn't understand the NHS reforms that were later described as the biggest mistake the Tories have made.
Osborne is also said to "kicking himself" that he did not stop the reorganisation of the NHS – which has come under intense scrutiny since its approval – with one senior Tory cabinet minister admitting it is the worst mistake they have made in government.
"We've made three mistakes that I regret, the first being restructuring the NHS. The rest are minor," the minister said.
A former No 10 adviser added: "No one apart from Lansley had a clue what he was really embarking on, certainly not the prime minister. He kept saying his grand plans had the backing of the medical establishment and we trusted him. In retrospect it was a mistake."
The news about the party's "mistake" over the reforms arrived as more than 400,000 NHS workers staged a four-hour strike over the government's refusal to give staff a 1% pay-rise over fears it would cost too much.
Andy Burnham, Labour's Shadow Health Secretary, said the admittance from the Conservatives shows Cameron "cannot be trusted" with the NHS.
He added: "If this is designed to bring patients and NHS workers back on side, then it won't work and will only make them more furious.
"David Cameron's reorganisation inflicted chaos on the NHS and has dragged it down. Patients, doctors and nurses pleaded with the government to stop it - knowing it would cause chaos - but they refused to listen back then and an apology now is no use.
"David Cameron ruled it out before the last election, broke his promise and brought forward the biggest NHS reorganisation ever at a cost of £3bn. Patients can see A&Es in crisis and waiting lists rising - this mismanagement of the NHS proves David Cameron cannot be trusted with it."
Dr Clive Peedell, co-leader of the National Health Action Party (NHA) which was formed following the coalition government's approval of the 2012 Health and Social Care Act, described the admission from the unnamed cabinet minister as a "depressing revelation".
He added: "It's no surprise to us that these reforms have been a disaster as this is exactly what we predicted – a huge mistake from start to finish. The NHA Party was launched precisely because of, and in direct opposition to, these reforms.
"It's totally reckless of David Cameron to have backed them without even understanding them. And his decision to make the protection of the NHS a central part of his conference speech is now shown to be disingenuous and inept as behind the scenes he was regretting his own reforms as a huge strategic error."
Current Heath Secretary Jeremy Hunt defended Lansley's changes, saying they were currently saving the NHS more than £1bn a year.
He said: "The difficult question for those who complain about Andrew's reforms is where would we have found the money otherwise?"