Objective: To provide background information on the approach of area based funding models for mental health services, to describe the considerations which have come to bear in the development process of the Victorian model, to explore the impacts of different models, and to suggest courses for further development.
Method: The history of this approach to funding in the UK and the USA is summarised, then an account is given of the development of the Victorian model. The position is put that the validation of such models is hampered by having only sparse relevant data. Suggestions are made for improving this situation.
Results: The Victorian model has come to include adjustments for socioeconomic disadvantage, the age, sex and marital status structure of the population, and a variable discounting for estimated substitutive activity of the private sector. Different methods of combining these adjustments into a working formula can be seen to have very different impacts.
Conclusions: The approach taken in development of this model can be expected to have major influence on funding within Victoria, but also more widely in Australia. The impacts of differing assumptions within these models are significant. Specifically targeted epidemiological research, and activity analysis of the private sector will be necessary to enhance the validity of models of this type.