Hospital funding boost lands, but aged care fault line cracks straight through it

Published on 2 February 2026

The Commonwealth’s latest hospital funding agreement was meant to signal stability. Instead, it has exposed a familiar fracture in Australia’s health system: hospitals get the headline money, while aged care once again sits awkwardly on the sidelines.

Under the new National Health Reform Agreement, announced last week, the Commonwealth has committed $219.6 billion over five years to state and territory health systems, including what the government describes as a significant funding uplift for public hospitals facing relentless demand, workforce shortages and more complex patients.

For some parts of the sector, it’s a long-overdue acknowledgement of reality.

Catholic Health Australia welcomed the agreement, pointing to an additional $25 billion in Commonwealth funding over five years and the recognition that public hospitals are operating under sustained pressure.

“Public hospitals are under significant and growing pressure, and today’s agreement acknowledges the urgency of the task ahead,” said Dr Katharine Bassett, Director of Health Policy at Catholic Health Australia.

“CHA has consistently called for increased public hospital funding to better meet community need, support the workforce, and ensure patients receive timely care. This investment is an important step in the right direction.”

The bed block problem everyone agrees on

Where consensus briefly emerges is on delayed discharge. Hospitals across the country are increasingly clogged with older patients who no longer need acute care but cannot access appropriate aged care or community support.

Catholic Health Australia singled out $2 billion aimed at reducing the number of patients occupying hospital beds while waiting for aged care as a critical inclusion.

“Older Australians stuck in hospital beds because they cannot access aged care is a major system failure that affects patients, families and hospital capacity,” Dr Bassett said.

“Addressing this bottleneck is critical to ensuring hospital beds are available for acute care and older Australians receive care that best meets their needs”.

CHA has also renewed its call for state governments to make better use of private hospitals with excess capacity to relieve pressure on public systems, a reminder that infrastructure already exists but is often sidelined by jurisdictional boundaries and funding rules.

Except the $2 billion isn’t actually there

Here’s the problem. Not everyone agrees that the promised aged care relief made it into the final deal.

Ageing Australia has accused governments of squandering what it calls a “golden opportunity” to address one of the system’s most obvious failures: older people stuck in hospital because there is nowhere else for them to go.

On Friday, the Commonwealth Government announced a new 5-year, $219.6 billion commitment to state and territory health systems. But conspicuously absent from the agreement was the previously reported $2 billion intended to address the challenge of delayed discharge for older people from state hospitals.

“This was a rare opportunity for state and federal governments to work together to improve outcomes for the thousands of older Australians stuck in hospital for extended periods, but that opportunity has been missed,” Ageing Australia CEO Tom Symondson said.

“The growing number of long stay older people in hospital should have been a clear warning sign for the states and the Commonwealth that only concerted, joint efforts could improve the situation. This pressure will only increase and addressing it will require action from all levels of government.”

The disagreement cuts to the heart of a recurring policy failure: hospital funding is negotiated and celebrated, while aged care remains fragmented across Commonwealth and state responsibilities, with no single lever powerful enough to force system-wide change.

Demand is accelerating, supply is not

The demographic maths is not subtle. The number of Australians aged over 65 will double in the next 40 years, and those over 85 will triple. Yet the pipeline of aged care infrastructure and services remains anaemic.

“Demand is growing faster every day. We must invest now. And yet last year we built about 800 aged care beds, a drop in the ocean compared to the 10,000 we should be building each and every year just to keep up with demand. We need to see substantial Commonwealth Government action on this.”

Ageing Australia argues that more beds alone won’t solve the problem, particularly for older people with high clinical and support needs who are currently cycling between hospitals and inadequate alternatives.

“But more beds alone will not resolve this issue – many older people in hospital need higher levels of care and support than a residential home can provide. That is where the states and territories must also play their role.”

There are examples of states stepping up. Western Australia’s $100 million Low Interest Loan Scheme and Victoria’s long-standing role in providing higher-acuity aged care services show what targeted intervention can look like. But these remain exceptions, not the rule.

A funding deal that stabilises, not transforms

At its core, the new agreement may steady hospital balance sheets, but it does little to resolve the structural fault line between health and aged care. Without explicit, joint investment to move older people safely and quickly out of hospital, funding boosts risk being swallowed by the same bottlenecks year after year.

As Symondson put it: “Every government in Australia can choose to prioritise the needs of older people – and they must. Older Australians deserve nothing less.”

For leaders across health, aged care and retirement living, the message is blunt. Hospital funding alone will not fix a system that is ageing faster than it is adapting. Until aged care is treated as core infrastructure rather than an afterthought, hospital wards will keep doubling as waiting rooms for a system that isn’t ready.

Tags:
aged care
funding
health system