In accordance with the NHR Agreement, the Administrator of the National Health Funding Pool (the Administrator), with the assistance of the National Health Funding Body (NHFB), is to calculate and advise the Commonwealth Treasurer of the amount of National Health Reform (NHR) funding each State and Territory is entitled to. The Commonwealth makes these payments into each State Pool Account of the National Health Funding Pool (the Pool).
Components of Commonwealth NHR funding
The components of the Commonwealth NHR funding calculation are presented in Figure below.
There are two broad types of funding: Activity-Based Funding (ABF) and Block funding. Each type has specific criteria set for what services are appropriate, with the preference to use ABF funding where possible.
Under the NHR Agreement, the scope of public hospital services that are funded on an ABF or block grant basis and are eligible for a Commonwealth NHR funding contribution currently includes:
- All emergency department services provided by a recognised emergency department
- All admitted and non-admitted services
- Other outpatient, mental health, sub-acute services and other services that could reasonably be considered a public hospital service.
Commonwealth funding for ABF, block and public health is calculated using the Commonwealth Contribution Model (CCM) which is a transparent, robust and independently reviewed methodology.
The Commonwealth’s contributions to Local Hospital Networks (LHNs) are adjusted at the end of each 6 and 12 months for every financial year once actual volumes have been validated via a reconciliation process.
Public hospitals will continue to receive funding from other sources, including the Commonwealth, States and Territories, and third parties for the provision of other specific functions and services outside the scope of the Agreement, for example pharmaceuticals, primary care, home and community care, dental services, residential aged care and disability services.
The Administrator provides payment advice to the Commonwealth Treasurer for the following purposes:
- As input to the Commonwealth Budget, based on initial estimates of activity from States and Territories.
- Establishing Commonwealth contributions for the future financial year, based on confirmed estimates of activity from States and Territories.
- This is updated throughout the year based on revised estimates.
- As input to the Mid–Year Economic and Fiscal Outlook (MYEFO).
A summary of the Administrator's July 2019 payment advice provided to the Commonwealth Treasurer is outlined below.
Table 1 - Commonwealth NHR funding payable in 2019-20