National Health Reform Agreement

The role of the Administrator of the National Health Funding Pool (the Administrator) and the National Health Funding Body (NHFB) in Australia’s health system was the result of significant public hospital funding reforms agreed by the Commonwealth and all States and Territories in August 2011, forming the National Health Reform Agreement (NHR Agreement).

The NHR Agreement outlines the shared responsibility of the Commonwealth, State and Territory governments to work in partnership to improve health outcomes for all Australians and ensure the sustainability of the health system.

The Addendum to the National Health Reform Agreement 2026–2031

On 1 July 2026, the new Addendum commenced. This represents a significant change to Commonwealth public hospital funding arrangements.

The Addendum replaces the earlier 2020–25 arrangements (extended by one year to 2025–26) and introduces a comprehensive new framework for public hospital funding for the period to 30 June 2031.

The new National Funding Model is designed to be simpler, increase the Commonwealth funding contribution and improve equity through:

the introduction of an ICR glide path, rising from 40.5% in 2026–27 to 42.5% by 2030–31
a significantly higher funding cap – increasing to 10.25% in 2026–27 and 8% per annum thereafter
a MFG of $15 billion in added funding over 5 years compared to what States and Territories would have received under the earlier 2020-2025 arrangements
a SMRF stream to invest in new models of care (commencing in 2027–28)
expanded safety and quality, and value-based care price settings that will progressively apply across the term of the Addendum
the transition of public health to Block funding with a focus on preventative and population health priorities.

Overview of health care agreements

For further details, please see below:

Prior to the NHR Agreement, States and Territories were paid a contribution for public hospital services from the Commonwealth via ‘block grants’ under the National Healthcare Specific Purpose Payment arrangements. These grants were calculated based on historical costs, negotiation and government decisions, with little transparency of the actual services delivered for the funding provided.
In August 2011, the Council of Australian Governments (COAG) agreed to major changes in how public hospitals were to be funded by Commonwealth, State and Territory Governments, including the move from block grants to an ‘activity–based’ funding system. These changes, detailed in the NHR Agreement, included establishing the Administrator and the NHFB to improve transparency of public hospital funding arrangements.
In July 2017, amendments were introduced to the NHR Agreement through a time-limited Addendum. This reaffirmed universal health care for all Australians as a shared priority and committed parties to public hospital funding from 1 July 2017 to 30 June 2020. It also focused on reducing unnecessary hospitalisations and improving patient safety and service quality.
In May 2020, through the signing of a new Addendum, Commonwealth, State and Territory Governments agreed to 4 strategic priorities to further guide health system reform:
improving efficiency and ensuring financial sustainability
delivering safe, high-quality care in the right place at the right time, including long-term reforms in:
- nationally cohesive health technology assessment
- paying for value and outcomes
- joint planning and funding at a local level.
prioritising prevention and helping people manage their health across their lifetime, including long-term reforms in:
- empowering people through health literacy
- prevention and wellbeing.
driving best practice and performance using data and research, including long-term reforms in enhanced health data.
The Addendum saw over $131 billion in Commonwealth funding to public hospitals over the 5 years of the agreement.
In conjunction with the Addendum, the Federal Government provided a funding guarantee (2019–20, 2020–21 and 2021–22) to all States and Territories to ensure no jurisdiction was left worse off as a result of the COVID-19 pandemic.
The National Partnership on COVID-19 Response (NPCR) was initially agreed to and signed by COAG on 13 March 2020 and ceased on 31 December 2022. The NPCR provided financial assistance to States and Territories for the additional costs incurred in responding to COVID-19 and included key functions to be
performed by the Administrator supported by the NHFB and other portfolio agencies.
Over the life of the NPCR (2019–20 to 2022–23), the Commonwealth contributed a total of $14.3 billion
in COVID-19 funding to States and Territories.
Further detail on COVID-19 funding is available from the National Health Funding Pool Annual Report 2019–20 to 2023–24.
On 5 February 2025, the Commonwealth, States and Territories agreed to Schedule K, providing a one-year extension to the Addendum to the NHR Agreement, from 1 July 2025 to 30 June 2026, and revised arrangements for 2025–26:
an additional one-time fixed funding amount of $1.7 billion in 2025–26, for States and Territories, to be considered as a top up contribution
a one-off uplift to the Commonwealth contribution rate for the Northern Territory
Commonwealth, State and Territory agreement to strengthen their shared commitment to the National Agreement on Closing the Gap during the period 1 July 2025 to 30 June 2026.
The Addendum to the National Health Reform Agreement 2026–2031 was agreed by National Cabinet in January 2026. The Addendum introduces fundamental changes to the Commonwealth’s public hospital funding methodology through the glide path ICR, higher funding cap growth rates, the MFG and a range of health reforms.

NHR Agreement

The Addendum to the National Health Reform Agreement 2026–2031

Overview of health care agreements

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