This went further than the Heather Simpson review of the health and disability system, which recommended such an authority but that it not have a significant function in commissioning health services.
Collins said the Government's proposal would divide New Zealand into "Māori and everyone else".
"As far as the National Party is concerned, segregation was an appalling idea last century and it remains an appalling idea in 2021."
She said if Te Tiriti obligations demanded a separate health system, it could lead to a separate education system or justice system.
"This is an important conversation we need to have before we take even one step towards carving up our communities.
"Labour needs to be honest with all New Zealanders about how they are interpreting the Treaty and how far they intend to take 'co-governance'."
The proposal was also very different to the advisory body recommended by the Simpson review, she said.
This included that the Māori Health Authority would have the power to veto any decision made by central body Health NZ.
"What does the Government hope to achieve by separating our healthcare along racial lines and then placing the power of veto in the hands of one race-based institution?"
There needed to be a formal consultation process, she said.
The Waitangi Tribunal in 2019 found the Crown had breached the Treaty of Waitangi for failing to improve Maori health over the past 20 years, telling it to set up a stand-alone Maori health agency and consider compensation.
Māori die on average seven years earlier than non-Māori, are 1.7 times as likely to die from their cancer compared to non-Māori, have heart disease rates more than twice as high as non-Māori, and rheumatic fever rates five times higher than non-Māori.
Māori Party co-leader Debbie Ngarewa-Packer said Collins' comments were "desperate racist politicking".
"Judith needs to read her own party review which acknowledges Te Tiriti and Te Ao Māori.
"And instead of playing to the white supremacists use her influence to work with us all to stop Māori inequities."
The party's review included five detailed recommendations around Māori, noting there was "work to be done to lift in this space".
This included embedding Te Tiriti o Waitangi in the party's constitution - there is currently no mention of it; bringing "Te Ao Māori capabilities" to the board; and developing a Māori and iwi engagement strategy.
There were also further recommendations to increase diversity within the party.
Speaking to Newstalk ZB, Collins declined to comment on if she supported the review proposals, saying that was up to their delegates to decide on.
It was important to look to our past and discuss its implications, but what Labour was doing was "absolutely separatist", she said.
"They have not campaigned on it, do not have a mandate, and are simply doing it because they can."
At Wednesday's Covid-19 update Associate Health Minister Ayesha Verrall defended the authority and proposed structure.
Giving it commissioning powers meant when funding was being discussed Māori could ensure it was being used to improved outcomes for Māori, she said.
Verrall said in her work prior to being an MP as an infectious diseases physician she'd "certainly seen the outcome of inequalities in our health system".
"I've seen Māori grandparents dying too young, leaving tamariki, who could have benefited from many more years with them. That is one of the differences between Māori and Pākehā."
