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PC News - August 2017

The National Disability Insurance Scheme – a review of the costs

A Productivity Commission position paper on National Disability Insurance Scheme (NDIS) Costs found that, while it is still early days, the NDIS is on track in terms of costs.

However, the speed of the NDIS roll-out, as specified in Bilateral Agreements between governments, has created significant challenges and will require further scrutiny.

About the National Disability Insurance Scheme

The NDIS is a new scheme designed to change the way that support and care are provided to people with permanent and significant disability. The NDIS is currently being rolled out across Australia.

At full scheme, about 475 000 people will receive individualised supports, at an estimated cost of $22 billion in the first full year of operation. The NDIS is based on the premise that individuals’ support needs are different, and that scheme participants should be able to exercise choice and control over the services and support they receive.

The scheme differs from previous approaches in a number of ways:

  • it adopts a person-centred model of care and support
  • it is an insurance-based scheme – it takes a long-term view of the total cost of disability to improve participant outcomes and to meet the future costs of the scheme
  • funding is determined by an assessment of individual needs (rather than a fixed budget)
  • it is a national scheme.

An enormous challenge

The NDIS is a major, complex national reform – the largest social reform since the introduction of Medicare. It will:

* involve a shift away from a block-funded welfare model of support to a fee-for-service market-based approach * increase funding in the sector from around $8 billion each year to $22 billion in 2019-20 * require around 70 000 additional disability support care workers (or around 1 in 5 of all new jobs created in Australia over the transition period).

Costs are broadly on track and benefits are being realised

Based on trial and transition data, NDIS costs are broadly on track with the National Disability Insurance Agency’s (NDIA’s) long-term modelling.

While there are some emerging cost pressures – including higher numbers of children entering the scheme and higher average package costs – lower than expected utilisation rates (only about three quarters of committed supports are being used) are offsetting the higher costs.

The benefits of the NDIS are also becoming apparent. Early evidence suggests that many (but not all) NDIS participants are receiving more disability supports than previously, and that they have more choice and control.

But the rollout schedule is highly ambitious

The rollout schedule for the NDIS is highly ambitious, given the magnitude of the reform. To reach the estimated 475 000 participants by 2019-20, the NDIA will need to approve hundreds of plans a day, while reviewing hundreds more (figure 1).

And while it is inevitable (given the size, speed and complexity of the reform) that there will be transitional issues with the rollout of the NDIS, the Commission found that there are already signs that the rollout schedule is compromising the NDIA’s ability to implement the scheme as intended, putting the scheme’s success and financial sustainability at risk.

And the number of participants entering the scheme is also only just starting to ramp up (figure 1).

The NDIS is a major reform

  • The NDIS is a major reform. Participants prior to NDIS: ~275 000; and under NDIS: 475 000. Funding prior to NDIS: $8 billion; and under NDIS: $22 billion. Workers prior to NDIS: 70 000; and under NDIS: 140 000.

Figure 1: Growth in number of participants in the schemea

  • Figure 1: Growth in number of participants in the scheme. This figure shows the growth in participant numbers predicted by NDIA modelling. Under the trial phase (July 2013 to June 2016) the scheme increases to around 30 000 participants. From June 2016 (the transition phase) the number of participants increases significantly reaching 475 000 by 2019-20.

    a The projections of scheme participants were prepared by the Scheme Actuary for the NDIA’s 2015 16 Annual Financial Sustainability Report using data at 30 June 2016. They do not incorporate actual participant numbers beyond June 2016.

    Data source: See Productivity Commission 2017, National Disability Insurance Scheme (NDIS) Costs , Position Paper, figure 2.1

The speed of the rollout has meant that the NDIA has focused too much on meeting participant intake estimates and not enough on planning processes,
supporting infrastructure and market development.

This focus has resulted in confusion for participants about planning processes; rushed phone planning conversations; inadequate pre-planning support for participants; problems for providers with registering, pricing and receiving payment; and a lack of effective communication with both participants and providers.

The position paper states that the NDIA must find a better balance between participant intake, the quality of plans, participant outcomes, and financial sustainability. Greater emphasis is needed on pre-planning, in-depth planning conversations, plan quality reporting and more specialised training for planners.  The sustainability of the projections in Figure 1 requires closer consideration.

An effective interface with other services is essential

The interface between the NDIS and other disability and mainstream services is critical for participant outcomes and the financial sustainability of the
scheme. The position paper calls for governments to set clearer boundaries at the operational level around ‘who supplies what’ to people with disability, and only withdraw from services when continuity of service is assured.

Adding a standing item to the agenda of each COAG council responsible for a service area that interfaces with the NDIS is also recommended to provide an opportunity to discuss, monitor and address emerging service gaps.

Prices are important for market development

Prices will play an important role in fostering a disability services market that will efficiently and effectively respond to the choices of people with disability. While the NDIA currently sets the maximum price of disability supports that can be charged by NDIA-registered providers, the Commission highlights a
potential conflict with the Agency’s other responsibilities, including maintaining financial sustainability.

The Commission suggests addressing the potential conflict in three stages – by introducing an independent price monitor over the transition period; transferring the NDIA’s powers to an independent price regulator; and continuing price monitoring following price deregulation.

A complete list of the Commission’s findings, recommendations and information requests is available in the overview of the position paper.

National Disability Insurance Scheme (NDIS ) Costs

  • Read the Position Paper released June 2017
  • The Commission’s final report will be presented to the Australian Government in October 2017.

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