The Council for the Australian Federation (CAF) has 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.

CAF met on 29 September 2025 to discuss national health and disability reform. CAF was joined at the start of the meeting by the Chair of the Board of Treasurers, the Hon Daniel Mookhey MLC.

In December 2023, National Cabinet agreed to long-term, system-wide structural reform of the health system alongside reforms to the NDIS and the introduction of additional foundational supports for people with a disability. This agreement reflected a shared goal to improve public health and disability services for all Australians.

First Ministers discussed the recent correspondence from the Commonwealth and are concerned that the Commonwealth does not intend to honour the December 2023 National Cabinet agreement, including the commitment that states and territories would be better off overall.

States and territories remain committed to the deal struck in December 2023 – a key part of this deal was the Commonwealth’s commitment to fund 42.5 per cent of public hospitals 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.

States and territories are acutely aware of the need to manage growing cost pressures and activity demands on public hospitals. First Ministers noted that these increases are largely driven by factors outside the states’ control. These factors include the high-inflationary environment following the pandemic, clinical workforce shortages, increased complexity and frailty of patients, and growth in ‘stranded’ patients that cannot access suitable aged or disability care.

States and territories cannot address these issues alone. While First Ministers recognised the Commonwealth’s efforts to improve access to care and reduce pressure on hospitals, these efforts will not shift the dial quickly enough.

First Ministers reaffirmed their support to work with the Commonwealth to get the NDIS back on track, including through the 2023 agreement to jointly fund, design, and commission additional foundational supports. This was a critical part of the December 2023 agreement. 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. This will have a real impact on the ability of states and territories to provide the services that Australians rely on every day.

State and territory First Ministers are willing to engage in positive discussions but call on the Commonwealth to also act in good faith and, within that context, to honour the commitments made at National Cabinet in December 2023.