A better way to fix the NDIS

More than 760,000 people are now on the scheme, with costs set to exceed $50 billion this year. It is one of the fastest-growing pressures on the federal budget, driven by design flaws baked in from the outset – subjective decision-making and overly porous boundaries foremost among them.

Further reform is coming. The government has set a 5 to 6 per cent cost growth target. This is not unreasonable – Medicare and aged care both fell within this range last year. The question is how it is achieved.

We now know that won’t be through means testing – that’s welcome. Means testing disabled Australians on the NDIS would be low value – two-thirds are in the lowest three income quintiles, and only 7 per cent are in the top – and means testing families of severely disabled children is vindictive.

But there is a growing risk that the government hits the target but misses the point – moderating growth while making the scheme worse. Ministers leaning in to narratives about fraud and “rorts” – which account for only a small share of projected savings – and relying on legislative fixes that constrain people’s choices could leave us with a diminished NDIS.

It does not need to be this way.

It is possible to moderate growth to 5 to 6 per cent while improving results for those who depend on the scheme most. But doing so requires confronting where the design of the NDIS is not working – because the main drivers of growth are structural.

Poor fit for early childhood

One of the clearest examples is early childhood supports.

The number of adults on the NDIS is only marginally higher than expected; the number of children is more than double. Children with developmental delay or autism make up almost half of participants, and about 170,000 of those received early intervention supports from the NDIS in 2025. But the NDIS has proved a poor fit for their needs.

The inclusion of early childhood intervention in the NDIS was a profound policy misjudgment. These supports are often delivered poorly, at higher cost, and in a way that has driven an avalanche of diagnoses without improving results.

This is a central driver of growth.

Early intervention should be carved out of the NDIS and delivered as a commissioned program, with predictable funding. The NDIS should be reserved for children with permanent and significant disability.

The government’s Thriving Kids initiative does not go nearly far enough. It should be expanded from eight years and under to all school-age children, with funding reallocated from the NDIS.

Government spending on psychosocial disability should also be recalibrated. Current NDIS spending in this area is poorly targeted, and many supports are not aligned with enabling recovery.

Without deliberate policy intent, Australia has sleepwalked into a system where the NDIS absorbs almost a third of all government mental health spending.

Redirecting part of this funding to an ambitious tier of recovery-oriented supports outside the NDIS would better meet people’s needs, reduce demand on the scheme, and moderate growth while preserving its role for those with the highest needs.

Reform must also go to the heart of how the NDIS allocates funding.

The planning and budget-setting process is a major driver of cost growth, allowing plans to inflate year-on-year.

“Too many people remain in group homes where high costs often come with poor results.”

Some elements of the government’s “new framework planning” move in the right direction, particularly standardised assessments aligning funding with need. But the broader direction is concerning.

There should be fewer rules, not more – more consistent budgets that fit within the overall funding envelope, paired with flexibility in how they are used. This flexibility is an important part of what makes comparable schemes cost-effective.

Instead, the government is introducing increasingly labyrinthine rules that risk tying people up in knots while proving impossible to police. Without a better planning experience, these reforms will struggle to win support – and reforms without support rarely succeed.

A final priority must be the highest-cost plans.

Almost a third of NDIS payments go to just 5 per cent of participants – those who require extensive daily support. This is one of the scheme’s most important responsibilities, yet it is also where it delivers the poorest value.

Too many people remain in group homes where high costs often come with poor results.

There is a better way. Alternative models – often described as individualised living arrangements – can deliver better quality of life, often at lower cost. Even modest shifts towards these supports could generate significant savings.

But perhaps the most important step is to be honest about the trade-offs.

The future NDIS cannot be uncapped, demand-driven and open-ended. These design features are unsustainable.

An NDIS with a secure but appropriately bounded budget can still deliver on its original promise to disabled Australians. But getting there requires choices – about scope, design and how growth is managed.

Reforms are coming. The task is to ensure they are the right ones.

Moderating growth is necessary. But it is possible to do it in a way that leaves the scheme stronger, more focused, and more effective for Australians who need it most.