Butler’s three-cornered battle with states and senators over billions for hospitals, disability and aged care

Health Minister Mark Butler’s plans to rein in spending on the $220 billion care sector are coming under attack, as state premiers take Labor to task over hospital funding and disability reform while the Coalition and Greens demand more funding to deal with waitlist blowouts in aged care.

State and territory chiefs on Wednesday accused the Albanese government of shortchanging Australians tens of billions of dollars in health negotiations, and warned the gap would jeopardise hospital services while leaving the states worse off under plans to take pressure off the NDIS.

The same day, a Senate inquiry into Labor’s aged care plans told the government it must uncap the delivery of home care packages to older Australians and move to a demand-driven system like the NDIS, to stop a situation where 230,000 elderly people are now waiting for help at home.

Health, aged care and the NDIS have become three of the Albanese government’s fastest-growing budget pressures as an ageing population, rising care costs and workforce challenges put increasing demands on government spending. Combined, they will make up more than a quarter of the federal budget next year and cost $250 billion by the next election.

Butler signalled soon after this year’s election that he would make difficult political calls to control spending, revealing plans to further curb NDIS growth.

But Labor’s 94-seat majority is not enough to guarantee a smooth path: the Coalition and Greens combined forces last month to make the government fast-track aged care packages, while the states have shown they can use their collective clout to stall movement on disability reforms.

Butler is negotiating the next five-year hospital deal with the states, which he has linked to outcomes on NDIS reforms intended to divert pressure from the $46 billion scheme. At the same time, the government is pushing through aged care changes that are set to make consumers pay more from November this year.

But the health, ageing and disability minister, a close ally of Prime Minister Anthony Albanese, faces further setbacks as states demand more money to land the funding deal while the Coalition and Greens use their Senate majority to challenge the government’s aged care reforms.

Almost two years after Albanese and state premiers committed to jointly fund a new disability system in a December 2023 National Cabinet meeting, a final deal is yet to be struck.

This led the Council for the Australian Federation – which includes NSW Premier Chris Minns and Victorian Premier Jacinta Allan – to accuse the Albanese government of failing to step up the federal share of hospital funding.

“[We have] expressed concern over significant Commonwealth government health funding shortfalls, which will impact the states’ and territories’ ability to provide the hospital services that Australians rightly expect,” the premiers and chief ministers said in a joint statement on Wednesday.

“First ministers … are concerned that the Commonwealth does not intend to honour the December 2023 National Cabinet agreement.”

Hospital costs are rising due to wage growth, an ageing population, more complex disease profiles and the continuing impacts of COVID-19. Patients in the public system face ballooning elective surgery waitlists, long emergency department wait times and ambulance ramping.

State premiers and territory chief ministers said the Commonwealth had promised to fund 42.5 per cent of public hospital costs by 2030, and 45 per cent by 2035.

“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 claimed.

A spokesperson for the government said the Commonwealth’s most recent offer would add $20 billion to public hospitals over five years, and represented a $7 billion lift from its previous proposition. This is on top of the $195 billion it already plans to spend on hospitals over the period.

“The Commonwealth is prepared to negotiate in good faith and looks forward to discussing the offer with states. We want to see it finalised by the end of the year,” the spokesperson said.

The states had previously accused Butler of sidelining them on NDIS reform in August, when he announced the federal government would move autistic children with mild or moderate support needs onto a new system called “Thriving Kids” from 2027.

The premiers on Wednesday said they were willing to work with the federal government to get the NDIS back on track. “First Ministers are concerned, however, that the combined health and disability reforms will not meet National Cabinet’s agreement that states would be better off overall,” they said.

The Coalition, Greens and independent Senator David Pocock warned that federal aged care services were also lacking under a system that caps the number of home care packages that can be delivered at one time.

There were 108,924 people waiting to receive their package in July this year, and 121,596 waiting for an assessment.

The senators last month teamed up to make Labor expedite 20,000 home care packages but they went further in a report published on Wednesday, saying the government should work towards uncapping the number of packages.

“Rationing care through packages is fundamentally at odds with a rights-based aged care system as recommended by the Royal Commission,” their report said. The government will deliver an extra 83,000 packages in the next year, but the senators said this would not meet demand.

“Labor will ensure people die on waitlists without the care they need. That should be unthinkable in a country like Australia, let alone deliberate government policy,” said inquiry chair, Greens senator Penny Allman-Payne.

Government senators rejected the recommendation, saying they took on board the department’s evidence that the system could not cope with uncapped numbers of health care packages “without unintended consequences”.

“As Australia’s population ages, demand for in-home aged care will continue to grow. Already the [home care] program is operating at record levels, with more than 300,000 individuals accessing a Home Care Package today, compared to approximately 155,000 individuals just five years ago.”

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