Last-ditch push to land hospital and NDIS funding deal, as states fight back

A last-ditch attempt by the federal government to secure a new public hospital funding deal in a matter of days could prove futile, with states and territories maintaining they will not sign up to the current offer on the table. 

The Commonwealth and states have been locked in a stalemate over negotiations for the next five years of funding for hospitals and a new state-run program for young children with mild developmental disability including autism.

The battle boiled over before Christmas, after the Commonwealth was labelled a "Grinch" for its offer of an extra $1 billion to the Commonwealth's existing offer to lift its contribution by $20 billion over five years.

The states claim a 2023 offer by the federal government to increase its share of funding to 42.5 per cent this decade and 45 per cent by 2035, in exchange for state governments picking up the tab for some disability services, has been reneged on.

But the prime minister has accused the states of failing to constrain health budgets, suggesting that the government's offer to cover nearly half of hospital costs was contingent on the states keeping cost growth in line.

"For states and territories to realise a Commonwealth contribution of 42.5 per cent of public hospital costs by 2030-31, under the capped glide path model, it will be necessary for your government to work to reduce growth in hospital activity and costs to more sustainable levels," Mr Albanese wrote to state leaders in September.

States remain displeased with offer

National Cabinet will be convened on Friday in Sydney in the hopes of forcing a deal for Australia's strained health system.

The federal government said it had put an additional $23 billion on the table, which includes $2 billion to address long-stay older patients to improve discharges, transitions to care and to fund more aged care beds.

However state and territory sources told the ABC that there had been no new offers from the federal government in the lead up to Friday’s meeting, and the existing offer remained inadequate.

Speaking at a press conference on Sunday, Queensland Health Minister Tim Nicholls said more needed to be done to address the issue of so-called stranded patients — those medically fit for discharge but stuck in hospital while waiting for a federal government residential aged care bed.

"Older Australians deserve better from their Commonwealth government than being left to languish in hospital beds. It's not good for them, and it's not good for our hospital systems," he said.

There are currently about 3,000 aged care patients languishing in hospitals across the country, and Mr Nicholls said 900 of those were in Queensland — the equivalent of almost an entire hospital.

"Quite frankly, that's not good enough, and that's why all the states and territories have come together to demand that the Commonwealth take significant action to address this shameful issue," he said.

Another sticking point remains the amount of growth the Commonwealth is willing to support, which is currently capped at 6.5 per cent a year.

National cabinet in 2023 agreed that would be replaced with a "more generous" approach, but under the current offer on the table, the cap will settle at 8 per cent in the medium term, which the states say is "unrealistic" and fails to keep pace with rising costs.

Time is running out to secure the deal, with the interim one-year public hospital funding agreement set to expire in June.

The federal government had wanted to finalise the agreement by the end of last year, and is now coming up against a new February deadline, when South Australia enters caretaker mode ahead of a state election, which will again place negotiations on hold.

Prime Minister Anthony Albanese has already warned the states funding will "roll over for another year" if they do not engage "constructively".

Health Minister Mark Butler said the offer on the table was generous. 

"For too long we've seen governments stuck in trench warfare playing the blame game on hospital funding," Mr Butler said.

"This infuriates Australians when all they want is to make sure they don't spend hours ramped in an ambulance or waiting in an overcrowded emergency department."

The states say demand is growing as the population grows and ages, and if the Commonwealth does not honour its commitments then hospitals will be left underfunded and overstretched.

Thriving Kids, which will operate outside the NDIS for some children with mild disabilities, is intended to be operational from July 2026.