Prime Minister Anthony Albanese has successfully negotiated a landmark $25 billion agreement with state and territory leaders to resolve long-standing disputes over hospital funding while implementing crucial measures to control the escalating costs of the National Disability Insurance Scheme.
Historic Health Funding Agreement Reached
During a pivotal meeting of the national cabinet in Sydney on Friday, Australian political leaders finalised a comprehensive health package that will see total public hospital spending reach $219 billion over the next five years. The agreement includes substantial top-up payments for smaller states that have been struggling with rising healthcare costs.
"These reforms will ensure that Australians can continue to access world-class health care as well as disability supports," Prime Minister Albanese declared following the negotiations. "It prioritises investment in our precious public health system, and builds on my government's commitment to strengthen Medicare."
NDIS Growth Cap Implemented
A significant component of the agreement involves implementing a strict 6% annual growth cap on the National Disability Insurance Scheme, which has been experiencing unsustainable expansion. Health Minister Mark Butler described the hospital funding component as the most substantial increase "in anyone's memory" and acknowledged the perennial tension between state and federal governments over health financing.
The new arrangement includes delaying the implementation of the Thriving Kids program by three months until October, responding to concerns from state governments about their readiness to manage foundational support services for young children. This program represents a key strategy to alleviate pressure on the NDIS budget by providing services for children under eight with developmental delays and other moderate needs through schools, health clinics, and community facilities.
Additional Funding Components
The comprehensive package features several important elements:
- $23 billion in new federal funding as part of negotiations to increase the Commonwealth's share of hospital funding to 42.5% by 2030, with a target of 45% by 2035
- $2 billion specifically allocated to accelerate hospital discharge processes for elderly patients awaiting aged care placements, addressing a backlog affecting over 3,000 individuals
- Budget adjustments designed to benefit smaller jurisdictions facing particular financial pressures in delivering health services
Broader Reform Timeline
While immediate measures address current funding challenges, broader structural changes to NDIS access rules are scheduled to take effect from mid-2027. The agreement comes after negotiations were disrupted by the emergency response to the Bondi beach terror attack, though Labor successfully pushed for completion before Christmas.
Recent data highlights the importance of these reforms, with figures from May 2025 showing that children under 15 constitute 43% of NDIS participants but receive just 13% of payments. Participants with autism or developmental delays as their primary disability represent half of all scheme participants but account for only 23% of total expenditure.
This landmark agreement represents a significant step toward sustainable healthcare financing in Australia, balancing immediate funding needs with long-term structural reforms to ensure the viability of essential services for all Australians.
