Health minister vows hospital funding deal by Christmas

With Labor back in power, stakeholders are expecting renewed momentum on the five-year National Health Reform Agreement (NHRA).

Negotiations on the forthcoming public hospital funding agreement, now postponed to commence in July 2026 – one year later than originally scheduled – continue to progress at a sluggish pace.

With an expanded portfolio, Mark Butler MP, Minister for Health and Ageing, Disability and National Disability Insurance Scheme (NDIS), asserts that progress is being made and that negotiations are underway.

“There was an agreement across the governments, between First Ministers, to work very hard over the course of the rest of this calendar year to strive to reach an agreement for a five year funding deal for hospitals by the end of the year, so by Christmas,” Minister Butler said.

“But also, the associated deals that are being negotiated in disabilities; NDIS reform and also the development of foundational supports for people with disability outside of the National Disability Insurance Scheme.”

In the meantime, a one-off hospital funding deal of $1.7 billion was thrown together for 2025–26, boasting a headline increase of 12%. Yet, the numbers tells a different story.

The so-called funding boost increases the National Efficient Price (NEP) from $6,465 to $7,258 – a jump of 12.3% on paper. However, after statistical adjustments for inflation and population growth, the real uplift is just 5.9%. That is barely enough to keep pace with population growth and the increasing burden of chronic disease, let alone reverse impact from long-term underfunding.

“Healthcare funding must go beyond simply sustaining services – it must be structured to incentivise and reward high-value care that leads to better health outcomes,” said Kylie Woolcock, CEO of the Australian Healthcare and Hospitals Association (AHHA). “Short-term, rigid funding models fail to provide the security needed for innovation, workforce retention, and sustainable improvements in care delivery.”

The Australian Medical Association (AMA) estimates the system needs an additional $12.5 billion in federal funding over the next four years, on top of $15.3 billion from states and territories under a new NHRA, to keep up with surging demand and strained hospital capacity.

“When funding is tied only to activity rather than outcomes, we miss opportunities to create a health system that truly meets the needs of people and communities,” Woolcock stated. “A shift to flexible funding models that are value-based is essential to driving real reform – ensuring that investment leads to improved health, rather than simply more services.”

Mounting pressure in aged care and disability is spilling over into public hospitals, exposing the systemic dysfunction of treating health, aged care, and disability portfolios as disconnected silos.

The question now is whether Minister Butler’s expanded responsibilities mark a genuine opportunity for integrated reform instead of simply reinforcing the tradition of political buck-passing from one broken program to another.

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