What is national health reform?

National health reform will deliver a better deal for patients, deliver more money and increased transparency and efficiency in the health system, benefiting all Australians, no matter where they live.

On February 13 the Council of Australian Governments (COAG) agreed to work in partnership on national health reform to secure the long-term sustainability of Australia’s health system.

To give effect to these commitments, every Australian government signed a Heads of Agreement on National Health Reform and a revised National Partnership Agreement on Improving Public Hospital Services and committed to signing a full National Health Reform Agreement by 1 July 2011.

In addition to $16.4 billion in extra public hospital funding to state and territory governments between 2014-15 and 2019-20, the Australian Government is delivering a comprehensive package totalling $7.8 billion over five years to reform Australia’s health and hospital system, which includes:

Key components of national health reform include:


National health reform will introduce new financial arrangements for hospital funding. The Australian Government and state and territory governments will share equally in meeting the future growth in hospital costs.

The Australian Government will pay 50 per cent of the growth in hospital costs in two stages – increasing to 45 per cent in 2014-15 and then to 50 per cent in 2017-18.

Under new structural funding arrangements, state and territory governments will also receive $16.4 million in extra hospital funding between 2014-15 and 2019-20 and as part of the $7.8 billion Commonwealth investment in the health and hospital system, $3.4 billion over the next four years for extra emergency departments, elective surgery and 1316 sub-acute hospital beds.

In return for the extra $16.4 million in hospital funding, state and territory governments will also deliver significant reforms to the way hospitals are funded and services are delivered, including:
The Australian Government will work with the state and territory governments to ensure safe and effective implementation of these measures. In addition, an expert panel will be established to provide advice on the effective implementation of a four-hour target for emergency departments and national access guarantee for elective surgery.

National funding pool and a national funding body

The Australian Government will improve transparency of hospital funding flows by establishing a single national funding pool for public hospitals and a national funding body to administer the funds.

The funding pool will ensure hospitals are paid the same way and deliver unprecedented transparency in hospital funding arrangements.

The Australian Government and state and territory governments will pay their share of base funding and efficient growth funding into a single national pool which will be
administered by a new independent national body.

The national funding body will pay state and territory governments from the national pool. State and territory governments will then direct payments to Local Hospital Networks in their jurisdiction.

The national funding body will transparently report on the number of services provided and paid for by the single national pool—meaning funding for public hospital services will be much more accountable.

Activity based funding

From 1 July 2012 hospitals will be funded based on the activity they undertake.

In some instances, payments to smaller regional hospitals and some highly specialised services will continue to be paid through block grants.

Activity based funding, or funding for each activity that a hospital performs, will be based on a national efficient price set by the Independent Hospital Pricing Authority.

The efficient price combined with indicators of safety, quality and access to services, will help identify hospital performance and drive improvements.

Reporting on performance

The National Health Performance Authority will be established to develop and produce reports on the performance of hospitals and health care services, including primary health care services.

The Government will also continue to develop and publish information on hospital performance on the MyHospitals website so the public can choose the best care to drive improvements in patient outcomes.

Greater focus on primary health care

The Australian Government will also have a renewed focus on the delivery of stronger primary health care to get people the services they need in their local communities, keeping people well and out of hospitals.

The Australian Government will establish Medicare Locals – a national network of primary health care organisations – to drive improvements in primary health care and ensure that primary health care services are better tailored to meet the needs of local communities.

The Government will strengthen its primary health care reforms by:

Local governance

Hospital management will be devolved to Local Hospital Networks and the establishment of Medicare Locals will lead to services that are more responsive to the needs of local communities.

Local Hospital Networks will also give local communities and clinicians a greater say in the delivery of their local hospital services.

Local Hospital Networks and Medicare Locals will work together to integrate services and improve the health of local communities.

Aged Care, Mental Health and Dental Health

The Australian Government will be responsible for a national aged care system, including the transfer of Home and Community Care (HACC) aged care to the Australian Government (except in WA and Victoria).

Mental health and dental health will continue to be reformed over the next three years, with greater growth funding provided by the Australian Government.

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Page last updated 25 February, 2011