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Our Environment

Our role in Australia’s health system was the result of significant public hospital funding reforms agreed by the Commonwealth and all States and Territories in August 2011.

Figure one provides an overview of recent health care agreements in Australia

National Healthcare Specific Purpose Payment Pre–2012

Prior to the NHR Agreement, States and Territories were paid a contribution for public hospital services from the Commonwealth via ‘block grants’ under the National Healthcare Specific Purpose Payment (SPP) arrangements. These grants (referred to as ‘block funding’) were calculated based on historical costs, negotiation and government decisions.

There was little transparency of the actual services delivered for the funding provided under block grants. Their growth was also simply linked to an indexation factor under the Intergovernmental Agreement (IGA) on Federal Financial Relations.

National Health Reform Agreement 2012–13 to 2016–17

In August 2011, COAG agreed to major changes in how public hospitals were to be funded by Commonwealth, State and Territory governments.

The most significant change moved the Commonwealth from block funding public hospitals to an ‘activity–based’ funding (ABF) system. These changes, detailed in the NHR Agreement, included establishing the Administrator and the NHFB to improve transparency of public hospital funding arrangements.

Addendum to the National Health Reform Agreement 2017–18 to 2019–20

In July 2017, amendments were introduced to the NHR Agreement through a time–limited Addendum.

The Addendum reaffirmed universal health care for all Australians as a shared priority and committed parties to public hospital funding from 1 July 2017 to 30 June 2020.

The Addendum preserves important parts of the existing hospital system, including ABF, the National Efficient Price (NEP), and the role of the Independent Hospital Pricing Authority (IHPA) and the Administrator. It also focuses on reducing unnecessary hospitalisations and improving patient safety and service quality.

Future Agreement 2020–21 to 2024–25

In February 2018, COAG drafted a new five–year Heads of Agreement (HoA) on public hospital funding and health reform, for commencement on 1 July 2020.

The HoA maintains a commitment to ABF and extends reforms under the Addendum to focus on improved safety and quality, health innovation and coordinated care to reduce avoidable hospital admissions.

The intention of the parties to continue the administrative arrangements under the existing NHR Agreement until 2025 provides certainty for the Administrator’s role and future operations of the NHFB.