National Health Reform

A National Health and Hospitals Network for Australia's Future

5. Reforms to establish the foundation of a new health system

The policy positions outlined in this section represent the proposal the Government will put to states at COAG in April. These reforms will equip the system to serve Australians well into the future, by building the foundation for effective future investment in health and hospitals.

5.1 Taking majority funding responsibility for public hospitals

The Commonwealth Government will become the majority funder of the Australian public hospitals system. The Commonwealth will fund:

• 60 per cent of the efficient price of every public hospital service provided to public patients;
• 60 per cent of recurrent expenditure on research and training functions undertaken in public hospitals;
• 60 per cent of capital expenditure, both operating capital and planned new capital investment, to maintain and improve public hospital infrastructure; and
• over time, up to 100 per cent of the efficient price of ‘primary health care equivalent’ outpatient services provided to public hospital patients.

For the first time, the Commonwealth will take clear financial leadership in the hospital system. The Commonwealth will fund 60 per cent of the efficient price of every public hospital service delivered in Australia. This is a fundamental change from the current contribution of around 35 per cent provided under the National Healthcare Agreement. The Commonwealth’s increased financial stake will provide leverage for system reform and a secure funding base for public hospitals into the future. In particular, this reform will permanently reverse the decline in the Commonwealth funding contribution for public hospital services over the past decade and put an end to the blame game over hospital funding.

Consistent with the NHHRC’s recommendations, the Commonwealth will use its strengthened financial position in the hospital system to drive system‑wide reform and create a better integrated, more unified national health system, with national standards and increased transparency and accountability. These changes will ultimately improve performance and health outcomes.

States will continue to be responsible for meeting the remaining costs of public hospital services, including meeting any costs over and above the efficient price, as well as the remainder of research, training and capital costs. This funding split creates a strong incentive for states to be as efficient as possible in playing their ongoing role in our public hospital system.

The Commonwealth will work with states to implement these new arrangements. These sweeping changes to hospital funding responsibilities will help address the challenges facing our health and hospital system. They will end the blame game, provide an unprecedented basis for national leadership of a unified health system, and ensure that incentives and responsibilities for delivering high quality, efficient health and hospital services are appropriately balanced across the federation. back to top