The NDIS has a targeting problem

Without the $19 billion factored into the budget from these savings, the cost of the NDIS will exceed $66 billion by 2027-28.

Changes to NDIS legislation made in the government’s first term were a modest start, intended to reduce cost growth to 8% a year, in line with the 2023 National Cabinet agreement.

But there is no guarantee these reforms will succeed, because the current scope of measures is inadequate to deliver the scale of change needed. And even 8% annual growth is untenable in the long term, far exceeding growth in other comparable government programs.

To make matters worse, one of the key measures identified to reduce NDIS costs — the establishment of new “foundational supports” (disability-specific supports outside of individual NDIS packages) — would actually increase the net spend on disability, since these services require both levels of government to find new money under the federal government’s current plan.

Unsurprisingly, this is proving challenging, particularly since progress on NDIS reform has been tied to parallel negotiations for an uplift in National Health Reform Agreement contributions from the federal government for state-run public hospitals.

Foundational supports were supposed to be rolled out from 1 July 2025 – but that’s not happened. New NDIS Minister Mark Butler recently pushed the target date out to the end of the year, to allow time to conclude the negotiations for funding them with the states.

Foundational supports are the right idea, but even if new ministers can bring more light and less heat into these negotiations, finding new money to fund them wouldn’t be the best way to fix the many problems with the NDIS.

Our new Grattan Institute report provides a different plan that doesn’t require any new spending.  Our plan would result in a further reduction in NDIS payments of about $12 billion over the next 10 years, and a further saving of $34 billion over the same period from not needing new money to fund foundational supports.

The NDIS has a targeting problem – there are lots of people who need some support but get nothing from it, and there are many people who do get onto the scheme but are then poorly served by it.

Under our plan, the existing NDIS budget would be used to fund foundational supports from within the same funding envelope.

The NDIS has proved particularly poor at delivering early intervention supports. Our research shows that an NDIS that loosely allocates money to families, who must then differentiate between therapies for their children in the marketplace under pressure from providers rather than simply being directed to the early intervention supports with the best evidence, is not the optimal way to direct public resources.

NDIS eligibility should be changed so that children with developmental delay and disability that need early intervention supports are directed to commissioned services that cost less but better serve more children and families for the same funding.

People who enter the NDIS with a psychosocial disability also get poor results from today’s NDIS, with funding aligning poorly to the evidence. This risks creating dependency rather than enabling personal recovery, which should often be the goal for this group.

NDIS funds should be better allocated so that services build capacity in the scheme and spread further to address unmet need for psychosocial disability support outside of it for the “missing middle” that frequently end up with nothing at all.

Fixing these issues involves accepting that, 12 years into the NDIS, one size has proven not to fit all. By reducing the NDIS’ sole reliance on individualised funding and directing a modest proportion of this money to an appropriately ambitious tier of foundational supports, the scheme can support its current recipients better and make the current budget go further to support more people in more efficient and effective ways.

Rebalancing disability services in this way would deliver better results for disabled Australians and all taxpayers. The reform won’t be easy, but it is no more difficult than finding more funding to feed a scheme that will continue to grow uncontrollably unless these design flaws, baked in from the outset, are fixed.

The NDIS is worth saving. It is a vital part of Australia’s social fabric that can still be world leading. An urgent course correction can be achieved by governments adopting our plan and disentangling the costs of foundational supports from negotiations on hospital funding. That way, this important area of reform can be progressed independently, and at no additional cost.