Massive budget blowouts from ongoing mismanagement of the NDIS risk skittling the whole scheme, argues former Social Services Minister Kevin Andrews.
A decade after its launch in 2013, the National Disability Insurance Scheme (NDIS) is on track to fund more than double the number of participants originally forecast, and to cost three to four times the original projections. When launched it was estimated to fund some 411,000 people at a cost of less than $20 billion. In 2020, it was estimated there would be about 500,000 participants by 2023.
Today, there are some 600,000 participants, a figure the scheme’s actuary projects will increase to more than a million people by the early 2030s. And the cost has now reached $34 billion. The March 2023 report to the disability ministers projected that the total cost could rise to $89.4 billion in 2031-32. How this escalation has occurred and what to do about it is one of the most pressing public policy issues facing Australia.
The NDIS was the consequence of a Productivity Commission report and a very successful advocacy campaign that appealed to a sense of fairness. Employing the slogan ‘Every Australian Counts,’ the campaign resulted in the introduction of the scheme by the Gillard Government in 2013. The first phase of the roll-out commenced in the Barwon region of Victoria in July that year, and was progressively introduced across the nation. The pace of the rollout—described from time-to-time as ‘building the aircraft while taking off’—and the requirement by the States and Territories to limit their contributions, effectively leaving the Australian government largely responsible for an escalation of costs, are both factors in the problems now bedevilling the scheme.
The scheme is novel: it does not exist anywhere else in the world, although there are elements of its approach in other places. At the core of the NDIS is a concept of the provision of “reasonable and necessary supports” that will “assist the participant to pursue the goals, objectives and aspirations” he or she desires.
In order to consider the future of the scheme, it is useful to review its origins and founding principles.
A discussion about the current and ongoing challenges facing the NDIS should begin with consideration of the 2011 Productivity Commission report, ‘Disability Care and Support’, upon which the scheme was based. Many of the issues troubling the scheme today are a consequence of departing from the Commission’s proposals. Two, in particular, are significant: the provision of three tiers of support; and the use of independent assessments.
THREE TIERS OF SUPPORT
The Productivity Commission report upon which the NDIS is based envisaged three tiers of disability support. Tier 1 embraced all Australians: “The NDIS is for all Australians since it would provide insurance against the costs of support in the event that they, or a family member, acquire a significant disability.”
Many troubles with the scheme resulted from departing from the Commission’s original proposals.
The second tier would provide information and referrals to other services, as distinct from directly funded support: “This would include providing linkages with relevant services for which the NDIS was not directly responsible, such as mainstream services and community support groups and services.”
The Commission envisaged that the number of potential ‘customers’ comprising this group “would be very high, but the overall costs would be small”. It proposed that the Local Area Coordinators would fulfill this role. Importantly, “all governments would continue to support a range of community and carer support services, including some existing or modified Home and Community Care services, for people with lower level or shorter-term disabilities”. It also stated that these types of services would continue to be block-funded.
Independent assessment of NDIS participants has a long and chequered history.
Tier 3 was designed to target “the much smaller group of people with significant care and support needs” while not displacing “the role of the family and the community in engaging and supporting people with disabilities where people’s needs are smaller or best met in ways other than taxpayer funding”. Nor would the scheme “cover people whose requirements for support would most appropriately be met by other systems”.
Significantly, the Commission excluded certain groups from the proposed scheme. In summary, the excluded groups included people acquiring new catastrophic injuries (to be covered by the proposed National Injury Insurance Scheme); those with health conditions for which the publicly funded healthcare system was best suited; people acquiring a disability after age pension age; and a group of people with periodic disability.
The commission estimated there were about 330,000 people with “significantly reduced functioning in self-care, communication, mobility or self-management and [who] require significant ongoing support”. It also estimated an early intervention group of around 80,000 people. “This would encompass people for whom there was good evidence that the intervention would be safe, significantly improve outcomes and would be cost-effective.”
There would also be a third group difficult to otherwise categorise. Significantly, it warned that “the NDIA would apply this third criterion judiciously rather than routinely. It would be constrained by guidelines and monitored rigorously for its effects on scheme costs. If the Agency was to use this criterion loosely, it could pose a risk to the overall financial sustainability of the scheme”. Finally, the Commission proposed “some funding would be available to carers who were under great strain and needed some support”.
It is clear the Commission proposed a scheme in which most people with a disability received support under Tier 2, with a smaller, confined group of about 400,000 to 500,000 on Tier 3 support. These were people who required long-term care and support. Nor did the Productivity Commission envision so many children on Tier 3 support.
The idea of independent assessments of participants in the NDIS has a long and chequered history. In its 2011 report which proposed the NDIS, the Productivity Commission recommended their use, stressing that they should be as objective as possible. “The people making assessments would need to be independent from the client (unlike treating general practitioners), be properly trained in the use of the tools and be approved or appointed by the National Disability Insurance Agency for the purpose of conducting NDIS assessments. The agency would monitor assessors for their appropriate use of the assessment tools.”
Nor would they be ‘rubber stamped’: “Prior to making budgetary decisions, the National Disability Insurance Agency would confirm that the particular assessment followed the appropriate protocol and was consistent with the ‘benchmark’ range of assessed needs for other people with similar characteristics. Deviations outside the norm would need to be reviewed. That means that the agency would detect and adjust excessively hard or soft assessments before people got their individual packages.”
More children are entering the scheme than expected.
There have been several attempts to introduce some form of independence in the assessments, involving a support needs assessment tool, reference packages, and typical support packages. The Morrison government announced that it would introduce independent assessments; but following widespread criticism, it announced in July 2021 that it was not proceeding with the proposal and would consult in a meaningful way with the sector.
THE BONYHADY/PAUL REVIEW
In a recent review paper, Professor Bruce Bonyhady, an architect of the scheme, and Lisa Paul, the former secretary of the Department of Education and Training, outlined five key challenges facing the NDIS. According to their paper, the NDIS has become “an oasis in a desert”, noting that “community supports for all people with disability, as originally proposed, have not been delivered. This has had a significant impact on the cost of the scheme. It has also left people who are not in the NDIS without support”. They say this is “deeply unfair”.
Second, noting that the NDIS funds ‘reasonable and necessary’ supports, they observe that this expression is poorly defined. “This unresolved issue is the cause of many of the scheme’s challenges—including stressful, time-consuming and poor planning experiences, inconsistent and inequitable decisions about funding and disputes between participants and the Agency.”
Third, many more young children are entering the scheme than was expected. “This partly reflects overall higher-than-previously identified rates of disability amongst young children. It also reflects a lack of supports for children with disability, outside the NDIS, in mainstream settings. With so few supports outside the NDIS, it is not surprising that parents are fighting to get their children with developmental concerns, delays and disabilities into the NDIS. Then, after receiving early intervention supports, they are not leaving the scheme.”
Markets in the NDIS have not worked as originally imagined.
They found that early intervention is not always based on best practice. Support for families has largely been ignored. There has been a focus on diagnosis rather than support needs. “These failings—together with the lack of supports for all children with disabilities in mainstream settings—is undermining the sustainability of the NDIS.”
Fourth, the markets in the NDIS have not worked as originally imagined. “Competition has not produced improved quality, innovation or diversity of services for all participants in all locations. For many participants, especially in remote areas, the limited availability or poor quality of services means that in practice they do not really have choice or control over their supports.” Workforce quality, training, and retention are also major issues. “The market system has not driven inclusion and helped to nurture connections with family, friends, and community. In fact, sometimes the exact opposite has occurred. All of these failings are undermining outcomes for participants and contributing to increasing scheme costs. In addition, not only do we not know whether participants are getting good outcomes such as employment and a good life; but we also do not know the relative quality of the supports they receive.”
Finally, Bonyhady and Paul note the NDIS is an uncapped needs-based scheme. “However, the NDIS must also be sustainable and its costs predictable for governments and the public. It also must provide certainty for participants and their families.”
These issues are not new. The Australian parliament’s Joint Standing Committee on the NDIS examined some of these issues during the previous two parliaments, identifying the ongoing challenges facing the scheme.
What is new is the acceptance that the financial pressures are unrelenting and unsustainable. Given that Bonyhady and Paul had been appointed by the current government, their previous views about the NDIS reform might provide an indication of their likely recommendations.
PREVIOUS BONYHADY PROPOSALS
In 2021, Professor Bonyhady made a submission to the Parliamentary Committee’s inquiry into the then government’s proposed independent assessments on behalf of the Melbourne Disability Institute, of which he is the Executive Chair and Director. He was scathing of the proposal, describing the “so-called independent assessments” as ‘roboplanning’. He had three objections to them. First, the proposed form of assessment “combines and uses tools for purposes for which they were never designed and for which there is not a shred of evidence of their validity”. Second, he argued that the proposed assessment “abandons goal-based planning, which is one of the foundations of the NDIS and essential to its success” and “replaces opportunity with a deficit-based approach”. His third objection was that the NDIA was seeking absolute power by removing appeals to the Administrative Appeals Tribunal (AAT).
Professor Bonyhady submitted an alternative nine-point plan for future assessment under the NDIS. This proposal included an assessment process co-designed with people with a disability, their family, carers etc. He suggested a hybrid process which included the input of experts, but not complete reliance upon them. Multi-disciplinary teams would be utilised, if necessary, in multiple settings. The process would remain individualised. Evidence for the assessment process, once evaluated, would be available to the parties. Ongoing review of the process and access to the AAT would be a feature of the system.
The government claims it has detailed modelling … but won’t release it!
Importantly, Professor Bonyhady encouraged the development of Tier 2, as proposed by the Productivity Commission, so that there is no longer a ‘cliff’ at the edge of the NDIS. “Failure to invest in Tier 2 will also continue to place on-going pressure on scheme sustainability,” he observed. He also urged the return of Local Area Coordinators to their original purpose of “assisting with service navigation and service development”.
I would expect that some of these points would feature in the report that he and Ms Paul deliver to the government. A central issue is whether the full financial pressures were known to Professor Bonyhady when he made his submissions to the parliamentary committee in 2021.
In April this year, the National Cabinet approved a Financial Sustainability Framework to reduce annual growth per participant at no more than 8 per cent by July 2026. This involves a reduction from the current 14 per cent, which is a significant request. To date, there is little information about how governments and the NDIS can achieve this goal despite the budget showing savings of some $59 billion over the forward estimates.
The Australian government claims it has detailed modelling … but will not release it! Two days after the budget was handed down, the minister responsible, Bill Shorten, released a five-point plan explaining how an 8.2 percentage reduction in NDIS growth would be achieved over the forward estimates. Initiatives in the one-page briefing note included investing in the NDIA’s capability and systems, strengthening supported independent living decisions, better supporting participants to manage their plan within budget, supporting the quality and effectiveness of services provided, and ensuring a lifetime approach to make plans more transparent and flexible.
All Australians, especially those living with a disability, deserve access to the government’s modelling. Even if it can reduce growth to 8 per cent, this is still a significant cost increase over the coming decade. There are ongoing cost pressures, especially for services. A shortage of disability workers and the reluctance of many therapists to participate in the scheme for example, add to inflationary pressures. To date, the government has focused on fraud in the system. This is commendable, but frankly it is low-hanging fruit. Indeed, a fraud taskforce has been operating since 2018.
The 2023 Intergenerational Report warns: “It is uncertain when scheme growth would moderate without the [financial sustainability] framework. Assuming no supply constraints, one projected scenario could be that Australian government NDIS payments could be an additional 3.5 percentage points of GDP higher again in 2062-63. This illustrative scenario for no framework could involve Australian government NDIS payments growing to 6.3 percent of GDP in 2062-63, higher than for Australian government spendings on health.”
One of the biggest challenges is the larger number of children entering the scheme. Estimated originally at about 80,000, it is now some 313,000—about half of all participants. On current indications, this proportion will continue to grow. There is a perverse incentive for parents to get their children into the scheme, as the alternative is very little other assistance. It is doubtful that the Productivity Commission had very long-term support in mind when it envisaged a group of about 80,000 for this support. Rather, it was designed to provide the short to medium term intensive interventions that would enable children to progress to requiring less ongoing support.
The Commission stressed that Tier 3 should be about long-term care and support–those people with “significantly reduced functioning in self-care, communication, mobility or self-management and [who] require significant ongoing support”.
As there are few Tier 2 supports, parents are paying thousands of dollars to have their children assessed in order to qualify for Tier 3. In order to have any real impact on the scheme’s galloping costs, this needs to be addressed (while recognising the people with more severe disabilities who will require significant long-term support). If there were adequate Tier 2 supports—and perhaps a rebuttable presumption in favour of this level of assistance initially—some costs could be reduced without diminishing the assistance required for individuals. Accordingly, Tier 2 would be an entry level, with plans aimed at shorter term, intensive interventions, and a pathway to greater independence.
A changed approach is proposed by the Actuaries Institute in its submission to the review. Children with autism would have better long-term outcomes in school and community-based programs outside the NDIS than receiving individual supports under the scheme, the institute says, but the State and local governments have largely abandoned the field. The institute proposes diverting $5 billion of the scheme’s budget currently spent on individual children with autism and developmental delay to restore specialist support in everyday settings including education, health and maternal care.
Planning is far too short term and lacks a focus on pathways towards the greater capacity of participants. Some children on the scheme will require a lifetime of significant support, but many others with milder disabilities such as developmental delays, should be able to engage the workforce ultimately. Where this is foreseeable, there should be a pathway in the planning process to this goal. Skills training should be integral to the scheme. Employment partners need to be developed to allow many participants to find and sustain meaningful jobs at the appropriate age and stage of support. Yet there are few items in the scheme that relate to employment funding.
It is also clear that the Productivity Commission proposed independence in the assessment process while envisaging that the participant, family, and carers would also have input into the decision-making. Yet this remains a contested issue a decade after the introduction of the scheme.
It is claimed the NDIS is based on an insurance model, but this is a generalised description that simply means, according to the Productivity Commission report, that all Australians should be able to acquire substantial support if disabled. This could equally be described as a welfare scheme. A true insurance model would rely on actuarial and other assessments to craft support for individuals based on the inputs required to achieve hoped-for outcomes, such as a level of functionality or employment. While recognising that there will be participants for whom this is unlikely, a progression pathway should be an integral component of plans.
Escalating costs place future NDIS funding in doubt.
Finally, there are also specific areas where the NDIA could save funds, for example in the costs paid for various equipment supplied under the scheme. Another example: the NDIA has been reluctant to use a direct commissioning of services model, which is included in the legislation, in appropriate circumstances even though its use could reduce costs, particularly where individuals residing at the same premises require nursing and personal care. It would also help to address the failure to move young people currently stuck in aged care for the want of alternative accommodation and support.
The scheme is based on what is ‘reasonable and necessary’ to provide long-term care and support for the individuals who require it. The extent of this provision must be clarified, otherwise the costs will continue to escalate, placing in doubt the ability of future governments to fund the NDIS.
Kevin Andrews served as Minister for Social Services in the Abbott government. He chaired the Joint Standing Committee on the NDIS from 2016 to 2022.