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Last week the Federal government agreed to $25 billion in new funding for hospitals and foundational supports.
InSight+ spoke with the Australian Medical Association (AMA) about what the funding means, whether it’s enough, and where it may fall short.
Last Friday, the Albanese government announced a new funding agreement between state and federal governments for hospitals and community foundational supports.
The agreement included an increase in spending of $25 billion over five years. The total spending will be $220 billion in the new period from 2026-27 to 2030-31, or an increase of 12%. The agreement has been under negotiation for the last two years, with an extension of one year and stop-gap funding of $1.7 billion.
The agreement should recoup the shortfall in Commonwealth funding present since 2018, and restore the Commonwealth’s share of public hospital funding to 45% by 2035.
As part of the agreement, states and territories have agreed to match a $2 billion commitment to the Thriving Kids program, which will attempt to begin to provide foundational supports to children with developmental disorders.
A long time coming
While state and territory governments have praised the agreement, the tone may be one of relief rather than enthusiasm in a health care system continuing to increase in size and complexity.
Dr Danielle McMullen is a GP and President of the Australian Medical Association (AMA).
Dr McMullen says federal funding must reflect the complexity and growth of our health system as a whole, and hospitals in particular.
“Our hospitals are in a logjam. Ambulance ramping gets a lot of airtime in the media, but it’s a symptom of a bigger problem. The flow into a hospital is stymied; it’s difficult to get people from emergency into the wards because you can’t move them from the wards to home, through exit block. People who need aged care or disability supports can’t leave hospital because those supports aren’t available,” says Dr McMullen.
“That’s going to take time, cooperation, and funding, to solve. This week we finally saw an agreement between Commonwealth and state governments for funding for the next five years. That’s been more than two years in the making,” she said.
“Anyone who tries to run a practice understands that not having certainty of funding is disruptive to a system. On top of that, since 2017, we’ve seen a relative decline in the Commonwealth contribution to that funding. State hospital systems were being squeezed tighter and tighter, and in the meantime there’s growing demand year on year. You’re trying to do more with less.”
“Last week’s announcement about the additional $25 billion from the Commonwealth does correct that shortfall. They’ve stuck to their commitment of 45% of funding by 2035.”
“I would have liked that to have been brought forward to 2030.”
Dr McMullen said that the negotiations have been longstanding.
“In 2023 [the Commonwealth’s] first offer was about $13 billion dollars. Just in the past two years, the cost of delivering care has meant that that offer had to go from $13 billion to $25 billion just to be equivalent.”
“So we’re welcoming that certainty of funding, but it’s only the beginning of the road.”
Clearing the logjam
Dr McMullen said that the main issue is what funding can be secured in the future.
“The more interesting conversation is: what are we going to do for the end of the next 10 years?”
“We’ve got an aging population. As a country we need to get better at preventive health; reducing preventable hospital admissions; boosting aged care and home services; general practice; and having a much more coordinated health system.”
“I think some of the reporting has been like, ‘Oh good: the deal was signed, so our hospitals are going to be sorted tomorrow.’”
“There’s no amount of funding that will turn around hospital performance overnight.”
“It is a positive step. No deal would have been disastrous. But [we need to] think of innovative ways to do things differently.”
“We saw really big investments in health in the last budget in general practice, and they’re now in hospitals. This does show that there’s a commitment to health and catching up where they haven’t been contributing.”
It’s not just about money
Dr McMullen encourages the federal government to take a holistic approach to improving the health system and its efficiencies.
“Now that we’ve got, at the commonwealth level, Health, Disability, and Aging in the one portfolio, there are opportunities for synergies.”
“[Ministers] should recognise that what we do in aged care has an impact on hospitals and general practice, and so on. We could have a much more coordinated system which saves money in the longer run.”
“It’s not the most expensive parts of our health system that could make the biggest difference to the performance of our system.”
Dr McMullen said it would be important to address how the states were passing on funding.
“How do we make sure that the states and territories ensure all of [the funding] flows through to their hospitals?” she said.
“We’ll be working hard to make sure they do. We expect they should. Our campaign called for them to invest any increases in innovation to improve the performance in hospitals.”
“Whether that’s looking at out-of-hospital care options, or how to streamline or deal with planned surgery wait lists.”
What needs to happen next?
Dr McMullen said that there are ways to make the health care system function better.
“If it was us, we would have brought the additional funding quicker, to relieve that pressure on our hospital system sooner. But generally speaking, we need to think of our health system as a whole, rather than the silos of general practice, hospitals, and private practice.”
“The Huxtable review had recommendations about how the National Health Reform Agreement (NHRA) could be more future-thinking.”
“Now we’ve got the funding part sorted, but there were so many other recommendations that are worth taking another look at. So I think we need to pull that off the shelf.”
Dr McMullen said that looking around the world, it’s easy to see how important it is to get healthcare right.
“There was a Commonwealth fund report about a year ago that still ranked Australia as the world’s top health care system.
“But that means it’s worth protecting.”
“We don’t need just more of the same. It’s not just about the funding; funding always buys us a bit of time, and arrests the decline in performance of our hospitals.”
“But more of the same is not going to fix rising chronic disease, an aging population. We just won’t keep up with that demand unless we think about doing things differently.”
An overarching problem is that almost all aspects of healthcare (other than public hospitals) are Federal, while hospitals are state. There is no coordination, for example when a patient is admitted to a public hospital, her GP of 20 years is unable to provide continuity of care, and can’t even read, let alone write in, the hospital’s EMR. The moment the patient is discharged, the hospital intern cannot provide any ongoing care, other than a discharge note.
There is overwhelming logic in having direct Federal control of public hospitals, so a single funder can decide whether it is better to pay paramedics to twiddle their thumbs while ramped, or to pay Aged Care assessors to expedite discharges.
Is it better for semi-urgent patients to attend hospital EDs out of hours, or to pay GP practices a higher rate to be open till 10pm, or 24/7?
Currently, if you come home from work unwell, your GP is probably closed, so you either tough it out overnight or go to the local ED, which cannot access your GP’s files, and see a doctor who doesn’t know you. The taxpayer pays far more for an 8pm intern consultation in a hospital, than the current Medicare rebate for the same consultation at your GP’s practice.
Stop the senseless waste of taxpayers’ money (all of the negotiations over 2 years!) in cross-border disputes, employ a single department to set priorities and allocate scant resources optimally.
This is great to hear. However the progressive failure of the private hospital system also needs to be looked at. Public hospitals have a duty to train future doctors also. Which makes the cost per patient extremely expensive. I believe the federal government should subsidise private hospital care as insurance rebates have not kept up with inflation resulting in closure of many private hospitals. The private sector delivers high quality care, which is much less expensive in total to all funders. Federal subsidies should reduce ever increasing gaps for patients while delivering more cost effective care with better outcomes. This scenario is particularly evident in the Maternity care sector. With private maternity units going bankrupt and closing on a background of increasing poor outcomes and birth trauma to mothers and babies. We should learn from the failures of the NHS and not follow its lead blindly.
The President of the RACGP has pointed out that the fact that each *increase* in hospital funding has been equal to half of the *total* funding of general practice shows how out of balance our approach is, and how little funding is being devoted to enabling GPs to prevent disease and to detect and treat it early, and thereby keep people out of hospitals.
One of the issues is that those whose careers, status and incomes are based on the building and running of ever larger and more expensive hospitals might not welcome being told: “We are going to reduce your hospital’s budget and make your hospital smaller (or close it)”.
I have seen this some years ago when the boss of a local public hospital emergency department was not happy to be told that suitable patients would be diverted to an adjacent general practice service, which would reduce the demand on the emergency department, that would therefore need less funding and have fewer staff.