Former Victorian health minister Robert Knowles says the state's mental health system needs a $1 billion overhaul.

A $1 billion overhaul is needed to bring Victoria's "appalling" mental health system up to scratch, a former health minister says.

Robert Knowles says mentally ill Victorians are at the mercy of a rigid system which restricts what help they can access based on where they live, as opposed to what they actually need.

"We would never accept that in our general health services. I described it as 'the last of the Soviet systems'. I think it's appalling," the former minister told Victoria's mental health royal commission on Wednesday.

He said the state's mental health services need an injection of nearly $1 billion extra dollars over at least five years, just to create a "reasonable" system.

The focus has to be on community-based treatment, as opposed to more hospital beds, as well as on children under the age of 12, he said.

"That's where 50 per cent of mental health issues first emerge," Mr Knowles told AAP after giving evidence.

He was health minister under the Kennett government between 1996 and 1999, and said mental health had never received enough funding, not in Victoria nor nationally.

"Frankly, I don't think it's been accepted by policymakers as a mainstream health issue," he told the commission

But Mr Knowles is confident reform is possible with the right recommendations and political follow-through.

The Andrews Labor government has said it will implement all the commission's recommendations.

Public hearings into the state's mental health system are due to wrap up this week.