Equitable investment in Victoria's alcohol (and other drug) treatment system
Key takeaways
> Alcohol is the number one drug Victorians seek treatment for, yet investment does not match its scale, cost or contribution to disease burden, so AOD services struggle to keep up with increasing demand.
> Current Commonwealth/Victorian funding arrangements for AOD services are inequitable and unsustainable.
> Sustainable AOD investment requires joint federal/state investment across primary, secondary and tertiary care through revised national funding agreements linked to relevant state and federal AOD strategies and AOD-led governance structures.
The silent contributor we don't invest in countering
Alcohol is linked to over 5,000 cancer diagnoses in Australia each year,¹ and almost 5% of the total disease burden.² And while much is rightfully invested in addressing the downstream results of alcohol harms such as cancer, investment in reducing the alcohol consumption driving them is comparatively low. As a result, alcohol harm significantly increases the need for acute, emergency, and comprehensive care. Almost two thirds of frequent ambulance presenters experience AOD harms, and 1 in 3 experience alcohol harms specifically.³ Alcohol remains the most common principal drug of concern among people seeking support (48% of AOD treatment episodes).⁴
These harms continue to put the AOD service system under pressure. Roughly 500,000 Australians who need help for addiction cannot access it.⁵ This stems from people not accessing services until crisis point, due to stigma and limited investment in primary and secondary care resulting in missed opportunities for early intervention.⁶
Current funding arrangements are inequitable and unsustainable
AOD services remain under-resourced to meet high demand and complexity, with existing funding arrangements being uncoordinated, inequitable, and unsustainable because:
There’s a lack of coordinated joint federal/state AOD investment, with none of the 80+ national health agreements specifically supporting AOD;
While states and territories contribute the most to primary and secondary AOD care, and all governments invest a lot in our hospital system, there is scope for greater federal investment in primary and secondary AOD care, and investment in AOD care in Victoria’s hospital system is inadequate to address the growing number and complexity of AOD presentations; and
AOD governance is limited federally and none of our several national AOD strategies have state/territory buy-in as none link to joint funding agreements. Victoria has a 10-year AOD strategy and supporting AOD-led governance structure, but these are likewise not linked to any joint funding arrangements.
Toward sustainable AOD investment in Victoria
The Victorian Government provided $415.5 million for AOD services in the FY26-27 budget, up from $398.6 million the previous year.⁷ While welcome, greater investment is needed for a sustainable AOD system that supports people experiencing alcohol (and other drug) harms with timely, person-centred care, reducing costs by intervening early before harms escalate.
This uplift can be achieved through a revised National Mental Health and Suicide Prevention Agreement. A 2025 Productivity Commission review found that this Agreement always intended to support AOD care but currently does not, and recommended a co-occurring AOD Schedule that supports primary and secondary AOD care.⁸ But Victoria’s Royal Commission into Mental Health found tagging AOD care onto mental health services hasn’t worked well.⁹ A dedicated AOD schedule is needed for coordinated investment in primary and secondary AOD care that respects the AOD speciality. A revised Agreement and AOD Schedule must also link to relevant state and federal AOD strategies and AOD-led governance structures.
Separately, the National Health Reform Agreement (NHRA) funds public hospitals. A mid-term review of the NHRA recommended it be expanded to a whole-of-health agreement covering primary and secondary as well as tertiary care, and that it be linked to the National Mental Health and Suicide Prevention Agreement. Some states, including Victoria, self-exclude Drug Services from the NHRA, meaning they must be fully funded by the state. Victoria’s AOD budget funds primary and secondary (community) and tertiary (hospital) AOD care, primarily via Drug Treatment Activity Unit (DTAU) activity based funding. With the DTAU currently under review, opportunity costs that arise from Victoria self-excluding Drug Services under the NHRA should be considered.
Recommendations
Include a dedicated AOD schedule in the National Mental Health and Suicide Prevention Agreement so the Commonwealth and Victoria jointly fund the state’s primary and secondary AOD care, and link this Agreement to relevant state and federal AOD strategies and AOD-led governance structures.
Model the opportunity costs of Victoria forgoing Commonwealth funding for hospital Drug Services under the National Health Reform Agreement and fully funding these services through its own DTAU. This will enable an informed decision about whether it is in Victoria’s interest to continue self-excluding Drug Services under the NHRA.
References
1 Harriet Rumgay et al, ‘Global Burden of Cancer in 2020 Attributable to Alcohol Consumption: A Population-Based Study’ (2021) 22(8) The Lancet Oncology P1071.
2 ‘Burden of Disease and Injuries Related to Alcohol and Other Drugs’, Australian Institute of Health and Welfare (Web Article, 11 December 2025) <https://www.aihw.gov.au/reports/alcohol/alcohol-drugs-disease-injuries>.
3 Anthony Hew et al, ‘Exploring the Reliability and Profile of Frequent Mental Health Presentations Using Different Methods: An Observational Study Using Statewide Ambulance Data Over a 4-Year Period’ (2025) 59(1) The Australian and New Zealand Journal of Psychiatry 74, 80.
4 ‘Alcohol and Other Drug Treatment Services in Australia Annual Report 2023–24’, Australian Institute of Health and Welfare (Web Page, 25 June 2025) <https://www.aihw.gov.au/reports/alcohol-other-drug-treatment-services/alcohol-other-drug- treatment-services-australia/contents/drugs-of-concern/alcohol>.
5 Alison Ritter, Jenny Chalmers and Maria Gomez, ‘Measuring Unmet Demand for Alcohol and Other Drug Treatment: The Application of an Australian Population-Based Planning Model’ [2019] (18) Journal of Studies on Alcohol and Drugs, Supplement 42, 47.
6 Rebecca Hammarlund et al, ‘Review of the Effects of Self-Stigma and Perceived Social Stigma on the Treatment-Seeking Decisions of Individuals With Drug- and Alcohol-Use Disorders’ (2018) 9 (November) Substance Abuse and Rehabilitation 115; Louise Birrell et al, ‘Treatment Rates and Delays for Mental and Substance Use Disorders: Results From the Australian National Survey of Mental Health and Wellbeing’ (2025) 34 (February) Epidemiology and Psychiatric Sciences 1.
7 Victorian Government, Department Performance Statement 2026-27 (Budget Paper, 5 May 2026) 61 <https://www.budget.vic.gov.au/budget-papers>.
8 Productivity Commission, Mental Health and Suicide Prevention Agreement Review (Inquiry Report, No 108, 16 October 2025) 17 <https://www.pc.gov.au/inquiries-and-research/mental-health-review/report/>.
9 Royal Commission into Victoria's Mental Health System (Final Report, February 2021) vol 1, 372.
