Reforming NDIS

Author: Simon Schwab

If you believe government exists to serve its citizens then the design of policy must be guided by this basic principal, a simple idea that sits at the heart of how modern governments support their people. In Australia, the introduction of the National Disability Insurance Scheme (NDIS), which aims to provide care for people with disabilities, is a good test of this idea.

The NDIS has been welcomed by the disability community, who have expectations the scheme will increase funding, coordinate support services and place each person at the centre of their care. At the heart of the NDIS is individual funding, a mechanism that allows people to direct their funding and choose services, with the support of a government allocation which is flexible and portable.

The precise application of individual funding within the NDIS is however unclear, with cash transfers not considered, the scheme appears to favour ‘managed purchasing’, where government or plan providers must determine an individuals need and then buy services from registered suppliers. The design of this policy mechanism is critical for everyone involved, with important consequences for how recipients of funding can use their allocation, while for government the design of individual funding will define its role in relation to recipients and service providers.

Government could define itself narrowly, as a funder and regulator, or conversely as a participant who has direct input into each funding and service decision. To test individual funding, pilot sites have been established in each state of Australia, with the full scheme to be launched in 2018.

The pilot schemes appear to have adopted a funding model where government allocates resources to services providers who then design and implement programs. Under this model issues have already emerged, with government funding appearing to be insufficient to cover service costs. If this is repeated when the full scheme is launched, the cost per service will become a problem, with the government’s overall costs closely linked to costs of the service sector, which are predominately fixed operational costs like wages, rent and other overheads.

Faced with this reality, government will need to either increase funding allocations per service or limit the number of programs it funds, rationing the provision of services for those in need, an unsustainable outcome for the scheme as a whole and for its intended beneficiaries.

To avoid these problems, government could conceive individual funding as a mechanism based on the specific needs of each individual, their type of disability and capacity, with differing levels of funding for different needs, an approach which would give government flexibility to define costs. Such an approach would allow government to detach its costs from the fixed costs of suppliers, with each individual receiving an allocation they could use at their discretion. Given the government won’t provide cash transfers, a new mechanism must be conceived to deliver individual funding.

The starting point for designing such a mechanism should be the principal articulated earlier, that government exists to serve it citizens. If it follows that each person has needs that differ from the next, it is a natural to conclude the scheme needs to be meet each individuals diverse needs.

If government defined itself as funder and regulator of a decentralised system, with funding aggregated and controlled by individuals and suppliers required to compete for customers, it becomes possible for each individual’s unique need to be met, with suppliers eager to please.

The ingredients for achieving this outcome have already been included in the NDIS, which contains provision for registered suppliers and importantly, ‘Plan’ managers. Ideally organised, Plans would be directed by recipients to purchase support from an ever expanding group of suppliers, who are responsive to their customers needs and compete based on price and quality. 

Plans would receive defined funding from the government, representing the specific needs of each individual, with Plans then working to find cost effective solutions to each client’s long-term care. Organising individual funding in this way avoids cash transfers but is still able to put people first.

Despite provisions in the NDIS legislation separating registered suppliers and plan managers, the current pilot schemes appear to be operating with the two roles as one. If this is maintained for long the scheme risks entrenching practices with little diversity in the provision funding, plans or purchasing, threatening the principals at the heart of individual funding, choice and competition.

If the NDIS is to be a truly open and responsive system, government must define its role in relation to recipients of support, registered suppliers and plan managers. If this occurs, the benefits will be long lasting, with a modern and flexible system supporting an active and ambitious community.

The publisher is the Centre for Welfare Reform.

Reforming NDIS © Simon Schwab 2014.

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