The NDIS review doesn’t add up to 8% cost growth - Grattan Institute

The two most important jobs for the National Disability Insurance Scheme review to secure its sustainability were to redesign the way people’s eligibility is determined, and then the way decisions are made about what and how much help they need.

The review has hit on broadly the right reform directions, but it lacks the detail that was needed to make the 8 per cent cost growth target imposed by national cabinet remotely plausible.

The review puts valuable focus on the foundational supports that people need outside the scheme, which were loosely agreed on at Wednesday’s national cabinet meeting.

But moderating cost growth to 8 per cent by 2026 – down from 15.1 per cent now – requires answers to the key questions of who should be eligible and how the funding they receive is calculated.

There are many problems with these processes. People’s access to the NDIS depends on the application of complex concepts that are not defined, such as permanence of impairment and substantially reduced functional capacity.

At present, access to the scheme is mainly determined based on information provided by health professionals outside the NDIS, who have no incentive to control costs and every reason to do the best by their patients. One need only look at the diagnostic trends for autism, which have rocketed because of its adoption as a fast track to NDIS access.

The review recommends changing these settings. That’s a no-brainer. But for this recommendation to be of practical use, it needed to say what should replace diagnosis. What specific assessment should be used and what thresholds should apply? We are no clearer on this than we were before the review.

It is good the review has raised public understanding of these problems, which were already obvious to policymakers – but is that enough return on investment for the past 18 months?

Open-ended criteria

The problems are even more stark in determining how much funding each NDIS participant gets. The unworkable folly of open-ended “reasonable and necessary” criteria (supported by no legislated rules because governments could never agree to make any) needs a complete overhaul if the scheme’s costs are ever to be predictable or sustainable.

There were two routes open to the review: extensive codification of everything that can be deemed reasonable and necessary (a Medicare Benefits Schedule for disability), or the ability for participant funding levels to be set using objective variables derived from standardised assessment.

To its credit, the NDIS review has opted for the latter. That’s the right choice for a disability scheme whose success will rely on individualised and creative use of funds – as happens in comparable schemes overseas.

But as with the recommendations on eligibility, the review is painfully short on detail.

It was perhaps unrealistic to expect the review to provide technical detail in the time it had available, but this was the work that actually needed to be done to get the scheme’s growth trajectory under control, and which now stretches ahead of government without resolution – probably to the next election.

No quick fixes

Delivering the cost growth target of 8 per cent is a tough ask. The low-hanging fruit of cracking down on fraud and waste will barely touch the sides of what is needed – even the shocking (if unsubstantiated) recent estimate of $1.4 billion lost in payment errors and fraud is only half of the amount scheme costs blew out in the past six months.

The government is right to be boosting workforce capability, as funded in the last budget, but by itself this will never be enough.

So long as NDIS planners are working with highly ambiguous criteria, making increasing volumes of complex decisions in less and less time (given staff numbers have nowhere near kept pace with participant growth), then the result will be much the same: uncontainable cost growth and a worsening participant experience of bureaucratic and adversarial processes.

There are no quick fixes from here. The review could have defined more clearly the path ahead, but it hasn’t. What is needed now is urgency and momentum behind the further design work required to turn the review’s sketch ideas into implementable policies to improve the scheme and contain cost growth.

This is the right thing to do, but it is complex work that will not yield results quickly. It is encouraging that governments have committed to the legislative changes that will be required, but this is also another source of potential delay. Legislating anything major in the first half of next year from a standing start risks a repeat of previous disastrous design flaws and unintended consequences.

A sustainable NDIS is still possible but if the next steps are weighed down by new quagmires of debate and negotiation, time will run out on a scheme that should have been world-leading.

Sam Bennett

Disability Program Director
Dr Sam Bennett joined the Grattan Institute as its inaugural Disability Program Director in September 2023. Sam has worked on disability, aged care, and health reforms at a national level for over fifteen years. In his previous role, he led the Policy, Advice and Research Division of the National Disability Insurance Agency, where he shaped and delivered national policy, and implemented the Agency’s Research Strategy.

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