The long-term viability of Australia’s mental health financial safety net is at risk, experts say, as rising demand exposes structural weaknesses.
Rising demands on the mental health system are pushing the financial safety net to its limits and exposing the structural weaknesses of a fragmented system, a new report says.
The report by Actuaries Australia identifies 22 sources of funding that help offset the personal costs of mental health treatment. That “mental health financial safety net”, as they call it, adds up to more than $18.5 billion per year – including Medicare, mental health helplines and private health insurance.
But despite truckloads of cash being injected into the system, the authors say funding for mental health care is highly fragmented, inconsistent and structurally weak, with a growing risk that patients will fall through the safety net.
The one in five Australians who report mental ill health each year should be able to access the care they need without falling into poverty or debt, the authors say.
“Australia’s mental health safety net is being challenged significantly and its long-term viability is at risk,” said lead author and Actuaries Institute member Cindy Lau.
“Australia has made significant progress in recognising and responding to mental health but the current system is unsustainable and the issue is growing.
“Our recommendations involve short-term investment to rebalance funding responsibilities, expand the safety net, and enhance its long-term sustainability. Without reform, the strain on people and systems will almost certainly worsen.”
The authors make eight recommendations to address the structural problems of affordability, access and integration; to focus action in areas across sectors that can improve coordination, continuity and affordability; and develop funding designs that support more effective resource allocation.
Reforms would help shift costs away from reactive mental health care solutions towards faster and more effective support, reducing pressure on emergency and acute care and leading to a more sustainable system, they said.
Elayne Grace, CEO of the Actuaries Institute, said the fragmented coordination of mental health funding and service delivery “is failing too many Australians”.
“Addressing this challenge requires collective action. This report puts forward recommendations to create a more integrated and sustainable system that strengthens support for those who need it.”
The authors said that $18.5 billion includes almost $4 billion from insurance: $2.2 billion from life insurance and income protection, $900 million from workers’ compensation and $650 million from private health insurance.
Yet patients still paid $1.4 billion in out-of-pocket costs in the year to June 2025 for mental health care provided by psychologists, allied health professionals, GPs and psychiatrists, they said.
And annual claims due to mental ill-health for total and permanent disability individual insurance have increased by 433% (from $39 million to $208 million) between 2014 to 2022, compared with a 200% increase in claims due to physical ill-health (from $193 million to $578 million) over the same period.
State workers’ compensation schemes have also experienced a rise in mental health claims, with a 43% increase in the past 10 years.
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The authors said Australia’s mental health system is made up of multiple funding sources, service providers and administrative structures which operate with different priorities, eligibility rules and oversight.
“The notion of a financial safety net for mental health is not a coherent whole in practice but a patchwork of different mechanisms, each with different design and scope.
“Even if each element is functioning well within its intended design and scope in isolation, poor integration across systems can create serious issues for people with mental health conditions and inefficiencies across the broader care and funding landscape.”
And there’s the added “burden of navigation”, the authors said. “Australia’s mental health funding ecosystem is highly fragmented. Consumers often struggle to move between services or maintain continuity of care when their needs shift.”
Poor coordination between systems like Medicare, NDIS and private insurance creates gaps in care, inefficiencies and heavy administrative burdens on users especially at critical transition points, the authors said.
Navigating Medicare, NDIS and other supports can be complex and delay care – especially for vulnerable people, they said.
“These systemic failures across mental health services continue to worsen and push consumers toward acute care, compromising recovery and sustainability.”
People on low incomes face significant barriers, and public funding support is finite while private insurance is costly to the point of being exclusionary, the authors said.
“There are currently many different funding mechanisms, but mental health care is not always ‘affordable for all’.
“Mental health care affordability in Australia is hindered by high out-of-pocket costs, limits on subsidised psychological care sessions, restrictive insurance policies and gaps in public funding.”
Out-of-pocket costs for psychology services, specialists, medication and simply seeing a GP for a referral can be significant, and access to funding doesn’t always mean access to care, they said.
“Access to mental health care in Australia is limited by geographic disparities, cultural barriers, administrative delays and workforce shortages. Rural areas lack providers, while culturally diverse groups and temporary visa holders face exclusion and stigma.”
People in rural and regional areas also face long wait times and high travel costs. One allied health worker told the authors:
“The situation in this area is so bad now, that many people cannot access a GP at all. Many surgeries have closed their books. People requiring mental health services cannot wait six weeks for an appointment.”