States and feds go toe-to-toe over hospital funding

Zac de Silva | October 2, 2025

Angry state premiers from both sides of politics have accused the federal government of driving up pressure on the hospital system by failing to properly fund the aged care sector.

The states have also taken the Commonwealth to task for what they say is a shortfall in health funding worth tens of billions of dollars, warning the lack of spending could mean Australians miss out on crucial hospital services.

Negotiations are under way for a new five-year hospital funding agreement, but the public back-and-forth over the deal is becoming increasingly acrimonious.

NSW Premier Chris Minns said a shortage of aged care beds was having flow-on consequences for the hospital system.

“We’ve got hundreds of patients in NSW public hospitals that would ordinarily be discharged, except they’ve got nowhere to go,” he told reporters in Sydney.

“They’re all aged and they need a place to go,” Mr Minns said.

The criticism was echoed by Queensland Premier David Crisafulli, who said aged care backlogs contributed “a big portion of the pressure on the hospital system”.

The broader stoush over healthcare funding followed a meeting of state and territory health ministers, who accused the federal government of planning to walk away from its funding pledges.

Australian Medical Association president Danielle McMullen said the blame game over funding was leaving patients in the lurch.

“It’s time for the Commonwealth, states and territories to stop pointing fingers and come to a sustainable agreement,” Dr McMullen said.

The argument stems from a deal struck in late 2023, which requires the Commonwealth to boost its support for public hospitals by billions of dollars.

Federal Health Minister Mark Butler promised to cover 42.5 per cent of the running costs by 2030 and 45 per cent by 2035, with the states to pick up the rest.

He is negotiating the next funding agreement with the states, which is tied to other reforms aimed at better supporting Australians with a disability and reducing pressure on the NDIS.

But after meeting on Monday, state and territory health ministers say they are concerned about the amount of money on offer.

“Under the arrangement now proposed by the Commonwealth, the actual share of Commonwealth funding will be closer to 35 per cent, falling tens of billions of dollars short of what is needed,” they said in a joint statement.

The federal government rejected the claims, saying it’s “committed to making a fair contribution under the hospital funding agreement”.

“The Commonwealth’s most recent offer to states included an additional $20 billion over five years,” a government spokesperson said, adding this was a $7 billion increase on the previous offer.

Mr Butler is hoping the new funding agreement will be finalised by the end of 2025.