The NDIS reform package is a step forward
by Sam Bennett
The National Disability Insurance Scheme has reached an inflection point. At the National Press Club on Wednesday, the federal government set out the most significant reforms to date in an effort to slow the scheme’s growth and restore confidence in its long-term sustainability.
Federal Health Minister Mark Butler announced a cost growth target of just 2 per cent over the next four years, returning to 5 to 6 per cent from 2030. Growth is tracking at more than 10 per cent this year.
The scale of the government’s ambition cannot be overstated. This policy represents a cut in NDIS spending in real terms over the rest of the decade.
There is good reason for the government’s urgency on this matter. With costs set to exceed $50 billion this year, public confidence is beginning to fray. Just 42 per cent of Australians think the NDIS offers value for money, compared to 79 per cent for Medicare.
The scheme’s viability and its ability to continue delivering essential supports rely on it maintaining its social licence.
The government is right to focus on addressing the scheme’s design flaws. But the operational effort required to deliver these reforms will be huge.
There is a risk of hitting the growth target while missing the point: relying on blunt cost reductions that worsen outcomes for participants while underlying design issues take more time to resolve.
Four key changes
The government’s reform package has four key design changes.
First, eligibility reform. The government plans to move away from diagnosis lists and instead rely on an assessment of functional capacity to determine entry into the scheme. This is a sensible approach but is not simple, especially within the proposed 18-month time frame. Similar changes were attempted in 2021 before being put in the “too hard” basket.
Second, more foundational supports outside the NDIS. This is the right thing to pursue – there is an absence of lower-level disability supports outside the scheme today. But it will be a tall ask to stand up this new system in time for January 1, 2028, when the government plans for new eligibility rules to come into place. It took governments 2½ years to agree on the so-called Thriving Kids scheme. A lot will depend on the states coming to the party so that people leaving the NDIS have other supports to go to.
Third, government directly buying certain supports, rather than leaving this to the market. This is welcome; a pure market-based approach has not delivered. It makes sense for intermediaries such as support co-ordinators and plan managers to be commissioned directly by government. But including supported independent living in this reform risks entrenching a group home model – an outdated approach that the NDIS was intended to replace rather than consolidate.
Fourth, a focus on fraud. Fraud is a real problem and tackling it is essential to the scheme’s integrity, but it is not a big driver of cost growth. On its own, mandatory provider registration is unlikely to cut costs, and it will be important for the necessary extension of mandatory registration to be balanced with opportunities for disabled people to make choices about the supports they purchase, including by directly employing their own staff.
The government also announced some shorter-term measures intended to bring costs down quickly, which will require further legislative change this year and carry a lot of the load in reducing growth.
The government will reduce the number of plan reassessments, which typically result in plan costs increasing by about 20 per cent. The reduction will need to be carefully managed to avoid missing participants with a legitimate need for reassessment.
The government also singled out social and community participation, with cuts of about 20 per cent. This may be warranted given ballooning costs, but this focus risks undermining a key objective of the NDIS.
Taken together, this reform package is a step forward. It signals a government committed to big changes to tackle the scheme’s excessive growth.
But there are many challenges in the path ahead. Not least a huge and complex implementation task to manage.
The real test will be whether this ambitious reform agenda can be delivered at pace, and translate into enduring system change – all while preserving the NDIS for those who rely on it.