A summary of the National Mental Health Commission plan for mental health services across the nation, leaked to the media on Tuesday, revealed the commission had recommended a radical overhaul of how mental healthcare is delivered in Australia, including that federal spending be moved from hospitals and into community and other non-specialist settings.

The report was also highly critical of the care available to people experiencing mental health issues and suicidal feelings, outlining huge shortfalls in resources.

The Royal Australian and New Zealand College of Psychiatrists said it welcomes many of the recommendations of the Commission's plan, and the push to improve resources, but was concerned "much-needed systemic changes are being planned in the absence of a clear funding model."

The leaked summary of the report says savings to fund early intervention and prevention can come from shifting funding from hospital care, as well as moving people off the disability pension.

The President of the College, Malcolm Hopwood, said more and more people needed urgent hospital care for mental illness, and cutting hospital resources would only create a treatment environment that was "unsuitable and inappropriate"

"Public hospitals are already experiencing excessive demand for their mental health beds and emergency departments, and the existing shortfall costs lives," he said. "The recommendation that a minimum of $1 billion in Commonwealth acute hospital funding be reallocated from 2017 into community-based services, completely ignores the massive gap in current service delivery by public hospitals.

"The assumptions of savings in disability pensions and clinical services cannot be guaranteed in the short-term," he said.

But the chairman of the National Health Commission, Allan Fels, has defended the recommendation, saying it would not come at the cost of people who needed urgent treatment.

"If there is a fixed budget we have to work within that," he said."I think everyone accepts the general point that we have to work towards prevention and keeping people out of hospital, and we have actually come up with a way to do that".

Professor Fels said in his many consultations with hospital psychiatrists he was often told that people were being left in hospital not because they needed to be there, but because there were no appropriate services available in the community, meaning they would be left homeless or without adequate treatment if released.

"I believe there could be a much quicker exit and shorter duration of stays for quite a few people in our hospitals if we had proper step-down facilities," he said. "These people are still very vulnerable and they need support, but they don't need the level of care that is provided in hospital, and if you get more resources in that area it would take more pressure off hospitals that are dealing with the cases that truly need to be there".

He said the plan only recommended that funding begin to be moved from hospitals to community care in 2017, but that any move would be handled carefully and slowly.