PART 6

FUNDING OF AREA MENTAL HEALTH SERVICES

2002-03 STATE BUDGET

6.1 Funds allocated to mental health services in Victoria in the 2002-03 State Budget amounted to $588.5 million. As part of the Government’s policy to treat more people with a mental illness at home and in the community, and to improve access to hospital services, the State Budget provided for further funding of $61 million over 4 years for inpatient services as part of the Hospital Demand Management Strategy and for non-hospital-based community mental health services. The initiatives to be implemented include:

• an increase in the provision of acute inpatient services, adult and aged clinical community services and psychiatric disability support services to clients and in areas with high needs; and

• new diversion, early intervention and prevention initiatives, including providing further sub-acute beds, intensive support for homeless people with a mental illness and co-existing substance abuse, and expansion of the dual diagnosis program to young people with a mental illness and co-existing substance abuse.

REGIONAL DISTRIBUTION OF MENTAL HEALTH FUNDS

Move to reform

6.2 Until the early 1990s, mental health resources were largely distributed on a historical basis. Past concentrations of spending on mental health services in Victoria focused around existing psychiatric hospitals since most mental health services in Victoria were institutionally-based¹. From the late 1980s, however, a policy of decommissioning major psychiatric institutions, and replacing them with “mainstream” inpatient mental health services, usually co-located with acute hospitals, occurred. In some instances, the physical infrastructure remained while responsibility for the facility was shifted to an acute health service. Resources were transferred from stand-alone mental health facilities to community-based settings, including clinical community ambulatory and residential services. These were supported by the establishment of psychiatric disability support services.

6.3 An initiative was launched in March 1994² announcing the redistribution of mental health funds from psychiatric hospitals toward services based on individual client entitlement. The mental health budget was to be distributed to regions on the basis of a weighted population formula that combined both population and proxy measures of service need. The additional cost of delivering services in rural areas was also taken into account.

6.4 Over the period 1992-93 to 1997-98, mental health spending on stand-alone hospitals reduced by $137.6 million (74 per cent), and $157.5 million was directed to the development of replacement services, mainly in community-based settings.

6.5 In April 1996, the Department of Human Services reported that the move away from historical funding of mental health services to a weighted population approach “was complete”³. Prior to the introduction of the weighted population formula, the allocation of funding across regions was rather variable. Chart 6A shows the current budget distribution by region, which is more even than prior to the redistribution.

Chart 6A
regional share of ADULT mental health budget,
2001-02

Source: Department of Human Services 2002. Data provided to Victorian Auditor-General’s Office.

Establishing Area Mental Health Services

6.6 In 1996, the Department established a revised funding framework and weighted population formula that calculated shares on the basis of 22 mental health areas rather than the Department’s regions as previously adopted⁴. While the formula retained the socio-economic and population structure factors, it also adopted a population density factor to replace “rurality” and included other factors.

6.7 Chart 6B shows the actual share of funds for Adult Mental Health Services across metropolitan areas compared with the share determined by the weighted population formula for all mental health services (not just adult services). Chart 6C presents similar information for country areas. Total actual funding of AMHSs depicted in the charts is $220.1 million in 2001-02.

Chart 6B
actual versus model-determined share of adult mental health funding, metropolitan areas, 2001-02

Notes: Actual funding data relate to recurrent funding of Adult Mental Health Services and include inpatient funding. Specialist services are excluded as are funding of Service System Capacity Development and Psychiatric Disability Support Services. Data for model-determined share are for 2002-03 and relate to total population (not just adults).

Source: Department of Human Services 2002. Data provided to Victorian Auditor-General’s Office.

Chart 6C
actual versus model-determined share of adult mental health funding, country areas, 2001-02

Notes: Actual funding data relate to recurrent funding of Adult Mental Health Services and include inpatient funding. Specialist services are excluded as are funding of Service System Capacity Development and Psychiatric Disability Support Services. Data for model-determined share are for 2002-03 and relate to total population (not just adults).

Source: Department of Human Services 2002. Data provided to Victorian Auditor-General’s Office.

6.8 Across areas, funding aligns fairly well with the model-determined share of funding based on the weighted population formula. However, discrepancies remain. The biggest discrepancies are in the inner metropolitan area (which receives more than its model-determined share) and the central-east of Melbourne (which receives less than its model-determined share). For example, the Central East Area Mental Health Service (AMHS) obtained 4.4 per cent of the State’s funding for Adult Mental Health Services in 2001-02, whereas the Department’s formula would have provided 6.3 per cent⁵. The Department advises that redistribution of funding to match weighted population share is achieved through the allocation of new funding. In the case of the Central East AMHS, in 2002-03 it had been allocated about 6.9 per cent of the clinical growth funding for Aged and Adult Mental Health Services.

6.9 The Department points out that while annual changes to funding allocations can be used to redistribute community-based resources relative to area needs, they cannot easily redistribute the current physical infrastructure, a process which can take years. This seeming inequity is balanced to a degree by inpatient services also providing services across area boundaries (so-called “out of area”).

Factors in the weighting formula

6.10 The weighted population formula used to determine notional funding includes the following factors:

• Koori population;

• low English proficiency;

• rural population density;

• socio-economic disadvantage;

• population structure;

• availability of private psychiatric services; and

• homeless population.

6.11 While these factors appear reasonable, the regional resource allocation formula should be periodically reviewed and updated⁶, because:

• new data sources become available and existing datasets are updated and revised; and

• the mental health environment is constantly changing.

The way forward

6.12 The Mental Health Branch of the Department has engaged a consultant to review the appropriateness of the current resource allocation formula. The revised formula is to take into account the potential for varying the formula between age groups and factors for higher costs associated with complex clients and rural service delivery. The final report is expected in October 2002.

CONCLUSION

6.13 Over time, the Department has made considerable progress in the redistribution of funds on a more equitable basis, but discrepancies remain. We endorse the Department’s strategy to examine and revise the resource allocation model.

RESPONSE provided by Department of Human Services

Audit acknowledges Victoria’s per capita Mental Health spending is above the national average per capita. In recent years between 1998-99 and 1999-2000 the average annual growth rate in State per capital expenditure was 2 per cent (adjusted for Commonwealth funding and constant prices), which was much greater than the average annual growth rate of 0.1 per cent achieved over the 5 years of the First National Mental Health Plan.

The total resource allocation formula including Aged, Child & Adolescent and adult has been used to indicate a funding “discrepancy” for adult.

In the case of the Central East Area Mental Health Service in 2002-03, Audit correctly indicates they have been allocated about 6.9 per cent of the new clinical community growth funding for aged and adult mental health services. The 6.3 per cent that Audit refer to is the total population share including child and adolescent services.

RESPONSE provided by St Vincent’s Mental Health Service

Resource allocation has occurred not only on the basis of the weighted population formula, but new initiative funds are allocated to achieve service viability. For instance to create viable Dual Diagnosis Teams, one position was allocated to each metropolitan AMHS, regardless of the weighting formula.

It is not only the allocation of funding that needs to be revised, but also the level of funding. Although considerable service system improvement can occur without additional funding, the increased demand for services indicates the need for increased funding.

Psychosocial disability support services have difficulty attracting and retaining staff because of the relatively low salaries they can afford to pay. Clinical services such as St Vincent’s have experienced particular difficulty managing to come in on budget for last financial year and this year because of the under-funding of the Psychiatric Nursing Enterprise Bargaining Agreement. The cost of employing psychiatrists is very high.

¹ Department of Health and Community Services 1994, Victorian’s Mental Health Service: The Framework for Service Delivery.

² ibid.

³ Department of Health and Community Services 1996, Victoria’s Mental Health Service, The Framework for Service Delivery Better Outcomes Through Area Mental Health Services.

⁴ In 2002, 2 of the Mental Health Service areas were combined resulting in 21 areas. Also, these areas are for Adult Mental Health Services only, since the catchments for Child/Adolescence and Aged Mental Health Services are different.

⁵ In making this comparison, it is assumed that the distribution of the adult population across AMHSs is similar to the distribution of the total population across AMHSs.

⁶ The Department has advised that the formulae has been updated for the 2002-03 Budget.