Health ministers fail to strike new hospital funding deal with Commonwealth, billions at stake

State health ministers have blasted the Commonwealth for failing to come to the table with adequate hospital funding after talks to strike a five-year deal fell apart on Friday.

In return, Federal Health Minister Mark Butler threatened that the Commonwealth could go it alone and spend the $23 billion on offer on other disability or aged-care measures instead if no deal was reached.

However, all sides have vowed to keep talking.

Mr Butler is still hopeful of reaching an agreement before the end of 2025, even if it requires Prime Minister Anthony Albanese and State and Territory leaders to step in.

A one-year extension to hospital funding expires in the middle of 2026 but the South Australian election in March sets a February deadline for striking a fresh arrangement.

The Federal Government slightly increased its offer ahead of health ministers meeting on Friday, putting an extra $21 billion over five years on the table, plus $2 billion specifically aimed at getting older Australians out of hospitals and into aged care.

It comes on top of the $12 billion the States would have got under the old agreement.

Mr Butler also lifted the Commonwealth’s cap on funding growth from 6.5 per cent to 8.5 per cent for the coming year, then dropping to 8 per cent.

State ministers said it had not been enough to tackle funding shortfalls.

“This is really not either about the Prime Minister or about me, this is about delivering for the patients who are in our hospitals,” Queensland’s Tim Nicholls said, a day after labelling Mr Albanese a Grinch.

“We certainly hope for a bit more Christmas cheer from the Commonwealth, and I expect that there will be ongoing negotiations.”

Mr Nicholls was frustrated the talks had dragged on for so long after leaders had agreed the general thrust of the deal in late 2023 – a sentiment echoed all round.

But the funding offered by the Federal Government did not get close enough to commitment that by 2030, Commonwealth money would cover 42.5 per cent of hospital costs.

WA Health Minister Meredith Hammat said everyone was keen to strike a deal but “it’s got to be the right agreement”.

“The quantum remains short of where we need it to be,” she said.

Growth caps were also a sticking point, with Ms Hammat saying they didn’t keep pace with the costs of providing hospital care.

“Having growth caps that reflect the reality of that growth is very important, and particularly in Western Australia, where we have a growing population as well as our ageing population,” she said.

“The issue that sits alongside this, that is front of mind for health ministers as well, is the number of older Australians … in hospital, medically cleared for discharge, but unable to get either aged residential care or a home care package so that they can leave hospital.

“Aged care is a federal government responsibility and we’ve been clear about calling on them to do more in this space.”

Ahead of the meeting, the state ministers released figures showing there were more than 3000 aged care patients stuck in hospitals, including 304 in WA.

Mr Butler said the Commonwealth had always been clear that its contributions each year would be capped.

He pointed to generous pay deals the States had struck with their health workforces as a primary driver of large cost increases, and said federally funded urgent care clinics were taking pressure of hospital emergency departments.

It was now likely a meeting of leaders would be needed to “crunch through”, the minister said.

“I think all of us, all jurisdictions, are eyes wide open that the runway is getting shorter and shorter for this deal,” he said.

That optimism came with a sting in the tail as Mr Butler said he and Mr Albanese were looking at how else the money could be used.

“There’s always other things that the Commonwealth could valuably spend its money on in the health and social care system, across disabilities, across aged care, as well as across health,” he said.

“I don’t want to get to that position. The prime minister doesn’t want to get to that position. But of course, responsibly, we are planning for the possibility we don’t strike an agreement with states and territories.”