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Here’s a critical opportunity to align the stars for meaningful national mental health reform

Introduction by Croakey: Innovation, funding and governance could be the key ingredients for real mental health reform in Australia, according to Dr Sebastian Rosenberg and Professor Ian Hickie at the Brain and Mind Centre, University of Sydney.

It is possible for the next National Hospital Funding Agreement between the federal and state and territory governments – currently under review – “to prioritise and fund out of hospital mental health services”, enabling innovation and improvements to mental health governance structures, Rosenberg and Hickie argue below.


Sebastian Rosenberg and Ian Hickie write:

Despite many reports and inquiries, and even more money and attention being paid to mental health, key issues like prevalence, severity, lack of access to quality care and increasing out-of-pocket costs have proven very stubborn.

The system remains split with the Federal Government funding primary care and limited specialist care through Medicare, while the states fund acute and forensic care largely through public institutions. No-one can be held to account for more specialised forms of specialist or team-based care, particularly in non-institutional settings. Basically, that core element of ‘stepped care’ is missing.

It is no wonder sustainable, practical and useful mental health reform has proven elusive. We have increasingly concluded that it depends on the unison of three key elements of successful policy-making: innovation, funding and governance.

With the National Hospital (note, it’s not health) Funding Agreement currently under review, there is quite a unique opportunity to build and capitalise on a rare alignment of these critical stars. But first, it is always sensible to appreciate just how we got here.

Howard’s jigsaw

The Council of Australian Governments was supposed to be the apotheosis of public policy making. Or, as Sinatra sang, if you can make it there, you can make it anywhere. Their 2006 National Action Plan on Mental Health eventually saw more than $5 billion of new spending on mental health over the subsequent five years.

However, rather than a strategic or joined up intergovernmental effort, this Plan rather proved a jigsaw comprising ill-fitting pieces.

There were more than a hundred separate initiatives announced by the governments, which had complete autonomy over priority setting and funds allocation. CoAG perpetuated fragmentation not integration.

The Rudd ***storm

For an instant in 2010, it looked as if then Minister for Health Nicola Roxon was going to grasp the nettle.

As part of their sprawling National Health and Hospital Commission review, it was suggested the Federal Government take responsibility for a community-based network to deliver out of hospital healthcare, including in mental health.

The Government said (on page 108):

The Government will also assume full policy and funding responsibility for primary mental health services for people with mild to moderate disorders as part of taking full policy and funding responsibility for GP and primary healthcare services.

Over time, the Government will also provide greater leadership for specialist community mental health services.”

This network failed to materialise – Prime Minister Gillard completed the National Hospital Funding Agreement and Rudd lost the next election.

Promise of growth

Rather than act, the Abbott Government tasked the National Mental Health Commission with reviewing mental health. Their review into Mental Health Services and Programmes began in 2014 and was eventually leaked to the press in 2015.

Despite the clarification provided by then Commission Chair Allan Fels, the Government was quick to hose down the Commission’s recommendation that a proportion of federal growth funding directed to hospital mental healthcare be diverted, by agreement, over coming years towards out of hospital services.

While the Commission identified problems associated with the increasing dependence on public hospital mental health services over community-based services, this Review process yielded no action.

From national to bilateral

Australia’s national mental health plans (there had been five going back to 1993) were replaced with individual bilateral mental health agreements in 2022, struck between the federal and each state and territory government.

The main task of each agreement was to disburse the $2.3 billion in mental health funding provided by the Federal Government in the 2021-22 Budget. The bilaterals do not offer any overarching model of care or new agreement between governments about role.

So despite several attempts at the highest political level, the key problem of lack of serious development of more specialised forms of ‘secondary’ care outside of hospitals remains unaddressed.

Mental healthcare is often characterised by cracks through which people and their families fall. This is surely the widest of them.

Aligning three stars

We have just published a paper outlining the need to first describe the terrain and people, then the services and then organise the funding for secondary mental healthcare. Three key ingredients necessary for this reform are clear.

1. Innovation

We need to clarify and define who needs secondary mental healthcare, for how long, noting that this form of care is largely episodic rather than ongoing, and with what expected outcomes. We need new models of multidisciplinary mental healthcare to deliver specialised, time-limited suites of evidence-based services. We also need a plan to manage when the person’s health improves or declines – what next?

There is also a need for innovative funding models to support teamwork, beyond the acknowledged limitations of fee-for-service medicine. Innovations in technology can support a team to work together well, and also facilitate service user and family and carer engagement and to provide patient reported outcomes to guide our future actions.

2. Funding

As the historical examples provided above amply demonstrate, just providing more money into our broken system will not fix mental health. Sure the gap between mental health’s share of the health budget (7.25% in 2020-21) and the burden of disease it represents (12%) remains significant.

But new funding must support innovation – not just more, but better.

People requiring more complex care are currently poorly served by single-practitioner focused Medicare services, fairly regularly rebuffed by departments of accident and emergency already overwhelmed with people facing more critical mental health issues, or not in care at all. A large ‘crack’ needs filling.

3. Governance

Australia’s very first national mental health plan successfully negotiated the federal/state split in responsibilities by establishing a set of foundational principles and then by the Australian Government providing financial incentives for the jurisidictions to change the shape of their investment and services.

Current negotiations regarding the next National Hospital Funding Agreement offers an opportunity for similar reform.

Existing block funding arrangements see the Federal Government responsible for 45 percent of growth funding for all hospital services. The next agreement could see this change, either overall or for mental health services specifically in recognition of the underspending already described.

Further, and perhaps more significantly, it is possible for the next national hospital agreement between the federal and state governments to prioritise and fund out of hospital mental health services.

With hospitals already straining under unsustainable pressure, nobody has more to gain than the states and territories – and most importantly service users – through the establishment of effective out of hospital secondary mental healthcare services that can provide earlier, more effective and more specialised interventions in the community.

The new Hospital Funding Agreement can be the catalyst for a rare alignment in these stars, making it possible for all governments to coordinate their policies and investments in a structured way to address a palpable gap in Australia’s mental health service system.

About the authors

Dr Sebastian Rosenberg is a Senior Lecturer at the Brain and Mind Centre, University of Sydney and Associate Professor, Health Research Institute, University of Canberra. Professor Ian Hickie is the Co-Director, Health and Policy at the Brain and Mind Centre, University of Sydney.

Conflict of interest statement

Professor Ian Hickie is the Co-Director, Health and Policy at the Brain and Mind Centre (BMC) University of Sydney. The BMC operates an early-intervention youth services at Camperdown under contract to headspace. He is the Chief Scientific Advisor to, and a 3.2 percent equity shareholder in, InnoWell Pty Ltd which aims to transform mental health services through the use of innovative technologies.


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