Victoria’s public hospitals cop $1.4bn federal funding cut, with levels set to remain until 2025

Premier Dan Andrews has revealed Victoria is unlikely to get the same level of federal health funding it had during the pandemic until at least 2025.

The Albanese government is facing criticism for cutting funding to public hospitals. Picture: Toby Zerna

Victoria is unlikely to get the share of Commonwealth health system funding seen during the pandemic until at least 2025, according to Premier Daniel Andrews.

When asked about a $1.4bn cut in federal money to be provided to the state over the next four years, Mr Andrews spoke about the uneven funding split between the two levels of government.

Under normal arrangements, states provide 55 per cent of health funding while the federal government contributes 45 per cent.

This moved to a 50/50 model during the pandemic, with Mr Andrews and other premiers campaigning to have this extended.

The Albanese government agreed to provide equal funding until the end of this year but from January 1 the scheme will revert back.

Mr Andrews said this agreement was not up for renegotiation until 2025.

“We worked very hard to get an extension of that funding arrangement and we were pleased to be able to achieve that.

“That was always to come to an end at the end of this calendar year.

“Talking to Dom (Perrottet) just the other day, we will remain committed to 50/50 funding but that agreement doesn’t get renegotiated until 2025.

“That’s our view, a proper partnership was a 50/50 equal effort.

“The 6.5 per cent growth cap is also challenging.”

Lower federal government funding levels to public hospitals are likely to remain until 2025. Picture: Getty Images

But Mr Andrews said he was encouraged that the federal government was open to negotiations and to providing further support by reforming Medicare and primary health.

“Medicare’s about keeping people out of hospital it’s not working at the moment,” he said.

In May, Mr Andrews said he wanted the 50/50 split funding to continue until at least June 30, 2023.

But this was knocked back in favour of the December finish date.

“If it was good enough during Covid to fund health properly, then it’s good enough as we recover from Covid to fund health properly,” Mr Andrews said at the time.

When asked on Saturday whether he had asked for a further extension, the premier said the federal budget had been completed and “we’re better off focusing on patients than politics”.

The cash slash is another blow to the state’s ailing health system, which has been hampered by a triple-zero wait-time crisis that contributed to the deaths of 33 people and an elective surgery waiting list that has blown out by 27.4 per cent in the past year.

Under the Albanese Government’s new budget, Victoria’s hospitals will lose more than $400m a year from the Commonwealth compared to what was expected in March.

Opposition health spokeswoman Georgie Crozier said the cuts came on top of a $2 billion cut in the health spending in this year’s Victorian budget.

“What’s even worse is at the same time Mr Albanese has gifted $2.2 billion to Mr Andrews’ dodgy Suburban Rail Loop,” she said.

“I think that most Victorians would be disgusted that Victoria’s health system is in crisis, yet Mr Albanese is cutting $1.4 billion from Victorian hospitals to gift to Mr Andrews for his pet rail line.”

The Albanese government has cut funding to Victoria’s public hospitals. Picture: David Geraghty

Opposition health spokeswoman Georgie Crozier says the cut will ‘disgust’ Victorians. Picture: Andrew Henshaw

The funding cut – due to be $645 million this financial year – came after elective surgery bans earlier this year caused the Commonwealth to dramatically revise down how much the state should be paid.

The shortfall will be in part made-good by $600m in Covid payments from the Commonwealth.

But Covid payments are scheduled to end in June, leaving Victoria worse off by $425.2m, $452.6m and $481m over the following three years, according to the budget papers.

Overall across Australia, Commonwealth hospital funding for public hospitals will be $666 million lower than was predicted in the March budget and will be $2.4 billion lower over the four years to 2025–26, budget papers show.

Data released on Friday showed that 84,955 Victorians were waiting for elective surgery at the end of September, a decrease of 1044, but still a 27.4 per cent increase from the 66,687 on the list a year ago.

The revelation comes days after it was revealed ambulance response times for critical emergencies are worse now than when the Andrews Government came to office in 2014.

The funding cut for Victoria’s public hospitals is due to be $645 million this financial year.

Victorian Health Minister Mary-Anne Thomas refused to confirm if the Andrews government would commit to filling the funding gap left by the Commonwealth, saying she was looking forward to working with her federal counterpart Mark Butler to devise a future plan to fund health.

“There will be another budget in May, but most importantly, we now have a health minister that understands the current funding arrangements are no longer fit for purpose,” she said.

“We need a fit for purpose funding model that recognises that our health system is changing and will continue to change.

She said now was the time to work collaboratively on a new funding model saying the current agreement was “no longer fit for purpose”.

“It does not recognise the challenges that our health system is facing,” she said.

Asked if Victoria could commit to funding the gap, Ms Thomas said: “All of this will be addressed in our forthcoming budget”.

“Every year we’ve increased funding. We stand on our record of delivering for the people of Victoria,” she added.

The Andrews government has not said if it will commit to filling the funding gap left by the Commonwealth. Picture: Andrew Henshaw

Speaking in Newcastle, Federal Health Minister Mark Butler said the budget projections were based on the information provided by the states on activity in their hospitals.

“Now activity has obviously declined over the course of Covid, particularly in the area of elective surgery, so the bill that New South Wales and Victoria and some other states have sent us, was lower than would have been projected before Covid,” he said.

“I have no doubt that that activity is going to rebound, it’s going to rebound pretty quickly. There’s a lot of elective surgery that has been deferred. And when that activity rebounds, the bill that is sent by the New South Wales and other state governments will be higher than

it is right now.”

Federal Opposition spokeswoman Anne Ruston said the budget papers said demands for hospital services will increase, and Finance Minister Katy Gallagher has stated the Government is ‘expecting demand for hospital services will continue to grow’.

“This is completely inconsistent with the funding provisioned over the next four years in their budget,” she said.

“Either this is a sneaky accounting trick to help Jim Chalmers with his budget bottom line, or the Government is just blatantly refusing to provide a guarantee for the hospital funding we all know is needed.”