Getting the market ready for the NDIS

Touted as the largest social policy reform since Medicare,[1] the National Disability Insurance Scheme (NDIS) is a transfer from a state government-run, bulk-funded service delivery for people with disability to a national, market-based individualised system. Its establishment in 2013 marked the NDIS as the only national scheme of its kind in the world designed to revolutionise how disability support funding and services in Australia are organised and provided for people with permanent and significant disability.

Addressing inequity in the disability services market

The push for a reform of the disability support system in Australia arose after decades of people facing difficulties with the “underfunded, unfair, fragmented and inefficient” disability services sector.[2] Before the NDIS, each state had their own separate and individualised systems to deliver support for people with disability. States would usually assign people to one disability service provider. People were restricted and had little choice to access appropriate support or change service providers.[3]

Furthermore, the Productivity Commission found most Australian families and individuals are unable to prepare for the risk and financial impact of significant disability.[2] Thus, the NDIS is an insurance scheme to cover all Australians against the risk of acquiring a permanent and significant disability. Actuaries John Walsh and Sarah Johnson explain the insurance principle of the NDIS, noting that the NDIS will require the support of the whole of Australia to pool the risks and costs of a significant disability to fund the scheme.[4]

A market-based approach

Whilst the NDIS is estimated to cost approximately $22 billion in the first year of full implementation, the NDIS is expected to improve the wellbeing of 475,000 participants and the wider Australian community, as well as lower the future costs of providing disability support.[5] The NDIS is person-centred, providing individualised funding packages to empower those with disability to freely choose their supports and meet their goals.[1] The NDIS also seeks to execute a smooth transfer of state government disability services to the non-government sector, with minimal disruption to staff and clients, and support the development of a diverse services-driven market. This market-based approach to disability support service is intended to foster competition between disability service providers to attract customers and enable consumer demand, giving rise to better services and more efficient use of public funding.[6]

Market readiness

To ensure successful implementation of the scheme, state and federal governments will need to work with the National Disability Insurance Agency (NDIA) to facilitate the growth and development of a thriving NDIS market. If adjustments are not made to the market to prepare service providers and support client capacity-building, there is a risk that the demand generated by the NDIS will exceed supply.[7] This has the potential to adversely affect participant outcomes and the sustainability of the scheme.

To address this, the Integrated Market, Sector and Workface Strategy has been developed by the Commonwealth, states and territories and the NDIA to “provide a clear plan to align market, sector and workforce development activities”.[8]

Building supply of disability services

One key area of action that the strategy sets out is the development of a diverse and sustainable range of suppliers. Disability service providers will require assistance in the challenge of adapting their administrative systems and processes to transition from a block-funding model to fee-for-service arrangements.[7] In addition to providing support to existing providers and attracting new suppliers, the NDIA will need to intervene and ensure the availability of disability support in limited or underperforming markets. Furthermore, providers’ performance requires ongoing monitoring and evaluation, to ensure they continue to provide quality and safe services that meet the expectations of clients, families and staff.

Building the disability workforce

Under the NDIS, a diverse and sustainable workforce is critical to providing more individualised support for people with disability. Australia’s disability workforce will need to grow rapidly to meet demand under the NDIS and have the capacity to deliver high quality, safe and innovative support to people with disability. The disability workforce would need to more than double from 2014-15 to 2019-20, requiring approximately 70,000 additional workers.[8] To alleviate potential workforce shortages over the short term, the Productivity Commission has recommended several policy changes such as allowing existing workers to work additional hours, permitting skilled migration and exploring different funding approaches to help volunteer organisations cover the costs of providing support for NDIS participants.[5]

Setting prices

Lastly, the successful implementation of the NDIS requires ensuring that the right prices are in place to allow providers to deliver high quality and affordable supports to participants. Under current arrangements, the NDIA’s role in price setting may conflict with its responsibility for funding supports. The Productivity Commission found that the current NDIA price arrangements are hindering market growth, because the price caps set have discouraged the provision of some types of disability supports.[5] It has even led to adverse outcomes for some participants, particularly those with complex needs.[5] According to the Australian National Audit Office,[7] the price of disability services and supports should be determined by a well-functioning NDIS market as it matures, not the NDIA. Therefore, the Productivity Commission recommends that the NDIA hand over pricing powers to an independent price regulator, with eventual price deregulation at full scheme.[1]

Challenges to the end state vision of the NDIS

Due to the magnitude of the scheme, the NDIS has been a challenging reform to implement.  The NDIS rollout is currently one year behind schedule and in some cases has failed to provide participants with adequate supports.[9] Under pressure to adhere to its highly ambitious rollout timeline, the NDIA has been criticised for prioritising participant intake over providing quality plans and stronger participant outcomes.[5] To ensure that the NDIS is operating as intended, it is therefore crucial that governments and the NDIA to work together to ensure that the disability services market is developing in line with demand.

[1] Productivity Commission. (2017). The National Disability Insurance Scheme – a review of the costs. Retrieved from https://www.pc.gov.au/news-media/pc-news/pc-news-august-2017/ndis-costs

[2] Productivity Commission. (2011). Disability Care and Support (Report no. 54). Retrieved from https://www.pc.gov.au/inquiries/completed/disability-support/report/disability-support-overview-booklet.pdf

[3] Laragy, C. (2016, July 6). Understanding the NDIS: how does the scheme work and am I eligible for funding? [Web blog post] Retrieved from https://theconversation.com/understanding-the-ndis-how-does-the-scheme-work-and-am-i-eligible-for-funding-58726

[4] Walsh, J., & Johnson, S. (2013). Development and Principles of the National Disability Insurance Scheme. Australian Economic Review, 46(3), 327-337. doi: 10.1111/j.1467-8462.2013.12032.x

[5] Productivity Commission. (2017). National Disability Insurance Scheme (NDIS) Costs. Retrieved from https://www.pc.gov.au/inquiries/completed/ndis-costs/report/ndis-costs-overview.pdf

[6] David, C., & West, R. (2017). NDIS Self-Management Approaches: Opportunities for choice and control or an Uber-style wild west?. Australian Journal Of Social Issues, 52(4), 331-346. doi: 10.1002/ajs4.23

[7] Australian National Audit Office. (2016). National Disability Insurance Scheme—Management of the Transition of the Disability Services Market (Report no. 24). Retrieved from https://www.anao.gov.au/work/performance-audit/national-disability-insurance-scheme-transition-disability-services

[8] Department of Social Services. (2015). Integrated Market, Sector and Workforce Strategy. Retrieved from https://www.dss.gov.au/disability-and-carers/programmes-services/for-people-with-disability/ndis-integrated-market-sector-and-workforce-strategy

[9] Hermant, N. (2017). NDIS enrolments surging, but at what expense? Retrieved from http://www.abc.net.au/news/2017-03-03/ndis-enrolments-surging-despite-difficulties-accessing-plans/8321232