Public hospital services in Australia are jointly funded by the federal and state and territory governments under a national agreement, complemented by payments from non-government sources such as private health insurers. State and territory governments manage and operate public hospital services (a small number are operated by charitable organisations on behalf of state governments). Services are provided free to public patients, but waiting lists may apply. Patients can elect to be treated as either a public or private patient.
Until recently, the federal Government provided recurrent funding for public hospitals as specific purpose payments to the states and territories under a series of bilateral agreements, which were generally indexed to population growth and other factors. The signing of the National Health Reform Agreement (NHRA) in 2011 signalled a shift in how public hospitals were funded that was based on growth in activity levels, known as activity based funding (ABF)—‘a way of funding hospitals whereby they get paid for the number and mix of patients they treat’.
A 2014–15 budget proposal to discard the ABF funding formula in favour of indexation was abandoned in 2016. The current national agreement for the funding of hospital services based on ABF principles is due to expire in mid-2020. A new agreement on hospital funding has been offered by the federal Government; all but two state governments have signed. This quick guide provides an historical overview of funding arrangements for public hospitals and recent developments. It does not address funding for capital and hospital infrastructure.