National Cabinet’s hospital deal doubles as an NDIS reset — here’s what’s really being agreed to

Australia’s First Ministers have struck a five-year hospital funding agreement worth an additional $25 billion, lifting total Commonwealth hospital funding to $219.6 billion (2026–27 to 2030–31) — but the more consequential story for people with disability is that this package is also being used to re-wire how disability supports are split between the NDIS and state “foundational” systems.

Below is what’s in the deal, what’s missing, and what it means for participants, families, providers, and the disability sector.

What was agreed

1) Hospitals: more money now, bigger Commonwealth share later

The Commonwealth will add $25 billion for public hospitals over five years, including $24.4 billion through National Health Reform Agreement (base funding for activity) plus > $600 million in targeted investment.

The funding settlement sits alongside (and is politically tied to) earlier commitments for the Commonwealth share of public hospital costs to rise to 42.5% by 2030 and 45% by 2035.

2) Disability: a cost-growth “target” and new state responsibilities

National Cabinet’s communiqué frames NDIS changes as sustainability measures, including:

• Targeting annual NDIS cost growth to 5–6% (down from ~9.5% cited in reporting).

• Changing how states/territories contributions escalate so they track actual scheme growth, capped at 8% from 1 July 2028, with a review point in 2030–31.

• A jointly funded $2 billion “Thriving Kids” program (the “first phase of Foundational Supports”), matched by states, with $1.4 billion of Commonwealth funding directed to states/territories to stand up services.

  
  

3) Timeline shift: delay in exchange for deliverability

The start date for Thriving Kids has moved to 1 October 2026, with full implementation by 1 January 2028, after states asked for more time.

The policy logic: why hospitals and disability got bundled

This deal is a federation trade: the Commonwealth pays more for hospitals now, and in return states accept more accountability for disability supports outside the NDIS (especially early intervention/child development supports).

Bundling matters because hospital systems and disability systems are already co-dependent:

• inadequate community supports → increased ED presentations and preventable admissions

• delayed discharges (e.g., housing/aged care/support gaps) → “bed block” pressures

• workforce shortages → the same allied health pool is being asked to do more in two systems

In other words, the agreement is trying to buy short-term hospital relief while reshaping the NDIS boundary in the medium term.

What Thriving Kids represents: a boundary shift, not just a new program

Public materials describe Thriving Kids as a way for children under 8 with developmental needs to get earlier support through local services (and not always through the NDIS).

The deeper policy move is this: the “default front door” for mild-to-moderate developmental supports is being moved from an individualised entitlement model (NDIS) to a state-delivered service model (foundational supports). 

That can be good policy if the replacement system is accessible, timely, high-quality, and genuinely portable across Australia. It can also be a harmful shift if it reduces choice and turns supports into rationed programs with waitlists and postcode variation.

Likely impacts for families and participants

1) Access: diagnosis friction may reduce — but queues may grow

Proponents argue a mainstreamed pathway could reduce reliance on costly diagnoses and speed support. Critics worry the practical effect will be bigger waitlists, because states must rapidly commission services at scale (and compete for the same clinicians).

Reporting already highlights families’ concern about losing the NDIS’s individualised control and predictability.

2) Equity: national branding, local reality

Foundational supports delivered by states can become a postcode lottery unless minimum service standards, eligibility principles, and performance measures are truly national. The agreement language points to a “national model,” but implementation is jurisdiction-by-jurisdiction — where variation is historically the norm.

3) Continuity: the transition risk is the “messy middle”

Clinicians describe a cohort who don’t neatly meet NDIS thresholds but still need structured supports — and who currently face “nothing.” If Thriving Kids is underbuilt at launch, that “messy middle” doesn’t get solved; it gets institutionalised.

4) Choice and control: the core tension

The NDIS offers individualised budgets and participant direction. A state program tends to offer packages and commissioned providers. Even if services are “easier to access,” families may lose:

• the ability to choose providers freely

• the ability to flex supports around school/community needs

• the certainty that funding follows the child (especially if moving interstate)

This is the central political and ethical fault line in the reform.

Implications for the disability services market and workforce

1) Two parallel markets will compete for the same clinicians

A rapid build of state-funded early intervention will pull from the same allied health labour pool as NDIS providers. If pricing and contracting aren’t carefully designed, we could see:

• clinician drift to hospital/state contracts (more predictable)

• reduced NDIS capacity in some regions

• higher “thin market” risk outside cities

  
  

2) Provider compliance and quality settings could fragment

NDIS has its own quality and safeguarding architecture. States have varied commissioning and oversight arrangements. Without interoperable safeguards, you can end up with different rights and complaint pathways depending on which door a family entered.

The fiscal mechanics: why the escalation cap matters

Two numbers in the agreement do a lot of quiet work:

• 5–6% annual cost-growth target: a political commitment to slow scheme growth (but not yet a clearly defined enforcement mechanism).

• 8% cap on state/territory contribution escalation from 1 July 2028: this changes incentives. If the NDIS grows faster than expected, states’ payments rise only up to the cap; if it grows slower, their payments track the lower rate. That can reduce state budget shock, but it also increases the importance of states actually delivering foundational supports (because that’s the pathway to reducing NDIS inflows).

This is why the agreement is best understood as a new federation bargain: money + boundaries + delivery obligations.

What’s missing: the questions that will determine whether this helps or harms

For disability communities, the unanswered details are not “administrative” — they decide outcomes.

A) Enforceable service guarantees

Will families have time-to-service targets (like maximum wait times)?Will there be review/appeal rights if a child can’t access supports promptly?

B) National minimum standards and portability

What are the minimum service levels each state must provide?If a family relocates, do supports transfer seamlessly?

C) Interface rules with the NDIS

Who decides “mild/moderate” vs “significant and permanent”?What happens at reassessment points, and how is disruption minimised? Reporting indicates assurances that children with higher needs remain eligible, but the boundary rules will do the real work.

D) Outcomes, transparency and independent evaluation

What outcomes will be measured (child development, family functioning, school participation, service timeliness, equity)?Will data be published by jurisdiction?

What good implementation would look like

If governments want this reform to be experienced as support, not cost control, the basics are clear:

1. Co-design with families and disabled people from day one in each jurisdiction.

2. National minimum standards, plus transparent reporting by state on access and outcomes.

3. Hard transition guarantees: no service cliff during the changeover; rapid escalation to NDIS where foundational supports can’t meet need.

4. Workforce plan that recognises shared supply constraints and prevents thin-market collapse.

5. Single, accessible complaints pathway (or seamless handoffs) so rights don’t depend on the funding stream.

   
   

Bottom line for readers

This agreement is being sold as “record hospital funding” — and it is. But for disability policy, it’s a structural pivot: shifting a meaningful slice of early supports away from the NDIS into state systems, while attempting to slow scheme growth.

Whether it improves lives depends on one test: will a family experience faster, better, more reliable support than they get today — without losing the rights and agency that the NDIS was built to provide?

If not, the reform will be remembered as fiscal federalism dressed up as early intervention.