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Funding Public Health in Australia

Partner Institute: 
Centre for Health, Economics Research and Evaluation (CHERE), University of Technology, Sydney
Survey no: 
van Gool, Kees
Health Policy Issues: 
Public Health, Prevention, Funding / Pooling, Responsiveness
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no no no yes no
Featured in half-yearly report: Health Policy Developments 9


The Public Health Outcome and Funding Agreements (PHOFAs) provide funding from the Australian Government to each of the State and Territory governments for a range of public/population health programs. The first PHOFA commenced in 1997 and the current third round covers the period from 2004 to 2009. This survey reports on the main aims and principles of the PHOFAs as well as a review conducted after the second round.

Purpose of health policy or idea

The primary purpose of bundling public health program funding (so called 'broadbanding') is to give the States and Territories flexibility to manage population health funding in line with local needs and priorities. There is no requirement for the States and Territories to top-up funds received under the PHOFAs but all of them do.

The Agreements relate to three key population health areas:

  • communicable diseases (focusing on HIV/AIDS);
  • cancer screening (focusing on breast and cervical screening programs);
  • health risk factors, focusing on alcohol and tobacco use, women's health, and sexual and reproductive health.

Main points

Main objectives

Key objectives of the policy are to agree on : 

  • the level and distribution of funding provided by  the Australian (federal) Government;
  • key principles, values, and general processes in providing public health services/programs 
  • performance indicators including outcome, impact and process measures for each of the programs under the Agreement;
  • roles and responsibilities for each level of Government in working towards the achievement of national objectives.

Type of incentives

Through the Agreement, total Australian Government assistance to States and Territories over the five years is AU$812 million. In order to receive their allocated funding on a year by year basis, the States and Territories must comply with certain aspects set out in the Agreement. There are some penalties for non-compliance. However, these penalties mainly relate to non-compliance of reporting standards rather than failure to meet certain performance targets.

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Characteristics of this policy

Degree of Innovation traditional rather innovative innovative
Degree of Controversy consensual consensual highly controversial
Structural or Systemic Impact marginal rather fundamental fundamental
Public Visibility very low low very high
Transferability strongly system-dependent rather system-neutral system-neutral

Population health programs are often described as being the 'poor cousins' of a country's health funding , despite some evidence that they provide good rates of return on investment. Population health programs have to compete for funding with the curative sector and it would appear that the value of an actual life is greater than that of a statistical life.  

The Australian PHOFAs provide the basis for a funding mechanism which attempts to redress some of these funding discrepancies by protecting an amount of funding available for population health programs, creating flexibility on how and which programs are funded and changes focus from inputs to outputs. 

The PHOFAs were introduced in a consensual manner with bi-partisan and cross government support - thereby setting the scene for low public visibility.

Whilst the vagaries of the Australian system of government have determined the shape of the PHOFAs, the idea of creating a more flexible, output driven approach to population health funding is a fairly system-neutral endevour.

Political and economic background

In Australia, the State and Territory governments are responsible for the direct provision of a number of health services, including many population health programs. The federal government, on the other hand, has few direct provision responsibilities but does control most of the nation's finances. The vast majority of taxes in Australia are collected by the federal government.

This sets the political and economic context of the Agreements;  the State and Territory governments seek funding for services from the Federal Government (preferably with  no conditions or restrictions ); the Federal Government wants greater control over how the State and Territory governments spends (what it sees as) its money.

The first round of these Agreements was signed in 1996, following a change in Federal Government earlier that year. We are currently in the third round of the 5-year agreements. 

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no no no yes no

Origins of health policy idea

Prior to the introduction of the PHOFAS, the federal government provided state and territory governments funds through what are termed Specific Purpose Payments. As the name implies, these were detailed agreements between federal and state/territory governments that tied funding to specific programs. The decision to broadband the Specific Purpose Payments for public health was taken by Government in 1996 and reflects the broader directions agreed by Health and Community Services Ministers for health system reform.

In the years leading up to the PHOFAS, some government agencies had expressed concern over the Australian Government's administration of payments to States and Territories. In particular, its focus on inputs and processes rather than on outcomes for clients. This focus, they suggested, led to uncertainty about whether the Australian Government's policy objectives were being met. In addition, the federal government was being critisised for using the Specific Purpose Payments to micro-manage what were essentially state and territory responsibilities.

Consequently, the PHOFAs are outcomes based agreements, focusing on the achievement of agreed outcomes and do not generally tie the States and Territories to specific activities, or to match funding.

Initiators of idea/main actors

  • Government

Stakeholder positions

In June 1996, the Council of Australian Governments (COAG) agreed to explore reforms designed to build a better health system. COAG is the primary political architecture for the heads of the Federal, State and Territory Government to set priorities and coordinate government activities that span both levels of Government.  The 1996 meeting was the first since the election of the newly elected Federal Coalition Government - which gave it the political will and capital to drive a new agenda. 

As one of its first reforms, the Federal, State and Territory governments agreed on long term "broadbanded" bilateral funding agreements.  A subsequent Australian Health Ministers' Council meeting (the COAG equivalent for health ministers) established:

  • the National Public Health Partnership, 
  • the development of  bilateral funding agreements with a view to improving efficiency and effectiveness of public health effort.

The National Public Health Partnership established a shared vision of what constitutes a modern and comprehensive national public health effort, and clarified the responsibilities and roles of the Federal, State and Territory Governments.

The bilateral agremments (termed Public Health Outcomes and Funding Agreements, or PHOFAs) focus on the achievement of agreed outcomes but do not tie the States and Territories to specific activities within each program. They were intended to allow States and Territories more flexibility and prioritise expenditures to local priorities within the confines of agreed national priorities.  In this sense they also shift focus from program inputs to outputs.   

These Agreements were fairly low key at the time of their implementation and non-controversial because they enjoyed support from government leaders from both major political parties.  At the time of first Agreement, the Federal Government was formed by the right of centre Liberal/National parties, whereas a number (albeit a minority) of  State and Territory Governments were formed by the left of centre Labor Party.

Actors and positions

Description of actors and their positions
Prime ministervery supportivesupportive strongly opposed
State and Territory Premiersvery supportivesupportive strongly opposed
Minister for Health (federal)very supportivesupportive strongly opposed
Ministers for Health (State and Territory)very supportivesupportive strongly opposed

Influences in policy making and legislation

The Agreements fall outside of the legislative process.

Legislative outcome


Actors and influence

Description of actors and their influence

Prime ministervery strongstrong none
State and Territory Premiersvery strongstrong none
Minister for Health (federal)very strongstrong none
Ministers for Health (State and Territory)very strongstrong none
Prime minister, State and Territory Premiers, Minister for Health (federal), Ministers for Health (State and Territory)

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

The implementation of the first PHOFA was fairly straight forward. This was primarily because the Agreements covered existing programs. No new services were added - making the policy in many ways a simple administrative matter. Thus, instead of being funded by grants on a program by program basis, state and territory governments were now given funds for a number of population health programs bundled together over a number of years. 



Monitoring and evaluation

The performance monitoring data provide the major source of information under the PHOFAs and are intended to make the state and territory governments more accountable to the federal government and the public. States and Territories have also agreed to provide statements of revenue, expenditure and compliance for the expenditure of funding provided by the Australian Government, within five months of the end of each financial year.

Information exchanges under the performance monitoring and financial accountability initiatives, together with the results of the National Public Health Expenditure Project, provide a solid basis on which to review achievements.

In part, the PHOFAs have delivered a more comprehensive, high quality and consistent national approach to data collection and monitoring of trends and arising issues. The evaluation report of the second PHOFA round indicated that significant improvements had been made across a number of public health fields including:

  • The mortality rate in the target age group for the BreastScreen Australia Program (50-69 years) declined from 71 per 100,000 in 1993 to 53 per 100,000 in 2001. The mortality rate for the whole female population decreased from 27 per 100,000 in 1993 to 21 per 100,000 in 2001. 
  • Between 1992 and 2001 the age-standardised cervical cancer death rate for all ages declined from 3.4 per 100,000 women to 2.2 per 100,000 women.
  • The annual survey of people attending Needle and Syringe programs reveals that Hepatitis C prevalence has continued at high rates in 2000 at 53 % of survey participants.
  • The most recent data on HIV infection rates indicate an increase in HIV incidence in three of the eastern states of Australia.
  • Smoking rates among adults are showing a slowing trend, however, there are indications that young people, particularly females, are taking up smoking at higher rates.
  • From 1998-2001 the use of ecstasy and designer drugs increased by 21% from 2.4 to 2.9 % of the population aged 14 years and over.

Of course, it is not possible to determine, on the basis of the evidence provided, whether any of these achievements were as a result of the PHOFAs, or whether PHOFAs had any significant impact on program administration, efficiency or flexibility.

The Australian Institute of Health and Welfare reports that between 1999 and 2004, funding of population health programs increased by 4.8% per annum in real terms.  Population health activities accounted for a steady 2.5% of total public health expenditure over the same period. 

Results of evaluation

A joint Government Review (2003) of the second round PHOFAs found that:

  • all governments were strongly in favour of the Agreements as a mechanism for the coordination of selected public health outcomes of national priority. 
  • PHOFAs were administratively efficient although some individual program's governance structures could be improved.
  • the Agreements relied too much on historically funded programs that were not necesarily the result of a priority setting exercise.   
  • the potential to reallocate resources between programs is limited by the nature of the performance indicators that, in effect, support continuation of historical levels of funding for each program. The indicators create barriers that restrict refocussing of effort across existing programs and within existing identified priorities, making it hard to make improvements to services and outcomes in non-reporting areas.
  • considerable disagreement on some permance indicators.
  • more should be done to create some structures that could help set new PHOFA priorities. 


Expected outcome

As reported by Bennet (2003), population health interventions, by nature, are complex, making them difficult to evaluate. This can make it difficult to establish the worthiness of some programs in terms of their return on investment.  For example, due to the long lead times involved in any demonstration of a positive outcome in population health, there are few examples of where government investment reaps rewards within the period of a three-year government term.  

In many countries, including Australia, there are vast differences between the funding of medical health care services and population health interventions, with the former being largely funded on the basis of individual demand through while there is often no mechanism to determine appropriate level of funding for the latter. The implication of this is that there are 'natural' resource allocation processes in curative services. If, for example, demand for GP services increases, funding automatically follows patient demand. On the other hand, population health programs are given fixed budgets, regardless of relative demand or value. 

The PHOFAS are an attempt to redress some of these discrepancies: 

  • Potentially, the PHOFAs could establish a mechanism by which population health funding is not only protected from the funding demands of curative medicine but also have delivered a mechanism for funding changes; preferably on the basis of sound research, positive trends from performance measures and rigorous priority setting exercises. 
  • Potentially, by providing greater flexibility to move resources from one public health program to another, State and Territory Government could allocate resources (across population health interventions) in line with priorities, emerging needs and best available evidence (including economic).

In some ways the PHOFAS do represent a step in the right direction for population health funding.  However, as discussed below, it would seem that in many ways the potential benefits are yet to be realised.

Impact of this policy

Quality of Health Care Services marginal neutral fundamental
Level of Equity system less equitable neutral system more equitable
Cost Efficiency very low neutral very high

After nearly ten years, the impact of the policy is not well researched or understood.  As far as we know, no attempt has been made to measure the impact of the policy against its stated objectives, apart from a joint government review of the 2nd round PHOFAS published in November 2003. The review did highlight some concerns raised by jurisdictions:   

  • high administrative burden for some reporting requirements.
  • lack of a dynamic mechanism to include new priorities and emerging public health concerns.
  • perception that the federal government was funding public health activities directly, bypassing PHOFA, and therefore fragmenting public health efforts.
  • lack of flexibility to allocate funding according to local needs.
  • lack of a mechanism to set new national priorities to guide local investment.
  • more effective resource allocation between priority outcomes is limited by performance indicators which, in effect, support continuation of historical levels of funding for each program.

Based on the comments of the joint review, the PHOFA's foreshadowed benefits for improving allocative efficiency do not appear to be realised. The initial conservative approach to limit broadbanding to existing programs probably ensured that the agreements were accepted by all levels of government. The challenge for future PHOFA rounds is to ensure that the funding mechanism is more dynamic and able to respond  to needs and evidence within an evolving set of national priorities.


Sources of Information

Australian Institute of Health and Welfare (AIHW) (2006). National public health expenditure report 2001-02 to 2003-04. Health and Welfare's Expenditure Series No. 26, AIHW Cat. No. HWE 33. Canberra: AIHW.  

Bennett, J (2003)., Investment in Population Health in Five OECD Countries, OECD Health Working Papers No 3. Organisation for Economic Cooperation and Development, Paris  

Department of Health and Ageing .Joint Government Review of the Public Health Outcome Funding Agreements (PHOFAs) 1999-2000 to 2001-2002 (2003), Canberra.  Available at:$FILE/phofa_review03.pdf  

Department of Health and Ageing website:  

National Public Health Partnership website:


Author/s and/or contributors to this survey

van Gool, Kees

Suggested citation for this online article

van Gool, Kees. "Funding Public Health in Australia". Health Policy Monitor, April 2007. Available at