Costs and Financing for the NDIS

Professor of Health Statistics

Director, National Centre for Classification in Health

Co-Stream Leader, NDIS Centre for Disability Research and Policy

Richard Madden

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Declaration of interests

› Chair, House with No Steps

› Board member, Royal Rehabilitation Centre Sydney

› 1987-88 Head, Disability Services, Commonwealth Government

› 1973-76 National Compensation Scheme

› Fellow, Institute of Actuaries of Australia

› I am a strong supporter of the NDIS and delighted with its commencement

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NDIS is essential and overdue

› Rights of people with disabilities are paramount

› Too many have no or inadequate support services

› Families and carers need support

› People will be able to purchase their own services

› Disability services workers deserve proper recognition and pay

› Disability services sector has to adapt

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Outline

› The costs of the NDIS

› Financing

› Possible sources of increased cost

› Possible responses to contain costs

› Needs of service providers

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Costs of the NDIS: Productivity Commission

› July 2011

› 410,000 expected participants

› Annual net cost in 2018-19 (current dollars):

- $5.0 – 8.0 billion, mid point $6.5 billion (P 779)

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Costs of the NDIS: Australian Government Actuary

› February 2012

› Amendments to PC costings:

- Reduction in offsets ($500 million)

- Allowance for SaCS award (February 2012)

› Annual net cost: $6.5 – 7.0 billion before SaCS award allowance

› Annual net cost: $7.5 billion after allowing for SaCS award

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Costs of the NDIS: 2013 Commonwealth Budget

› 460,000 expected participants

› Full implementation by 1 July 2019

› No clear statement of full implementation net costs

› $6.2 billion in new Commonwealth money in 2018-19

› A chart in Disability Care Australia May 2013 (part of the Budget papers) indicates new Commonwealth funding around $8 billion in 2019-20, the first full year of implementation

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Financing

› 0.5% levy on taxable incomes (extension of Medicare levy)

- will raise $3.3 billion in 2014-15

- to be paid into a Disability Fund (hypothecated)

› States receive 25% of this, for use in funding the NDIS

› States are to transfer current funding progressively to the Commonwealth as they vacate disability services

› Commonwealth share of the levy ($15.9 billion) will more than fund additional NDIS costs up to 2018-19 ($14.3 billion): Macklin et al press release, 1 May 2013

› From 2020-21 onwards, Disability Care Australia May 2013 shows NDIS is fully funded by levy and savings measures

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Possible sources of increased cost

› Bruce Bonyhady, Chairman, DisabilityCare Australia, 23 June 2013

1. Ensure eligibility boundaries and reasonable and necessary supports are maintained and not widened

2. Complementary systems (health, education, aged care, employment, transport) must not shift costs to NDIS

3. Ensure a competitive market for disability service provision to contain service delivery costs

University submission to Senate Committee on Community Affairs, February 2013

4. Uncertainty over individual funding: Assessments of entitlements is ‘bottom up’, with no priority setting mechanism; ‘reference packages’ of services are meant to contain cost, but mechanisms are unclear

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Some options to contain costs

› Keep States financially involved

› Casemix development

› Reform injury compensation

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Keep States financially involved

› Many of the complementary systems are State domains: health, education, housing

› Therefore having States at least partially responsible for NDIS expenditure would reduce cost shifting incentives and permit more coordinated cross sector planning

› People with complex needs require support from multiple sectors, so outcomes could be improved, as well as costs contained

› Would also avoid the waste involved in dismantling State administration systems

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Casemix funding

› Well accepted for hospital in-patients

› National health reform process built around National Efficient Prices (NEPs) for each casemix group

› Each casemix group is largely determined by the characteristics of the patient, notably health conditions

› As experience builds on costs for various assessment levels, a similar process, based on assessment of functioning rather than health conditions, could be developed for NDIS determination of the amount of funding for reasonable and necessary support

› Specific circumstances (environment of the client) could be handled through additional payments

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Reform injury compensation

› Chapter 17 of the Productivity Commission systematically described the flaws of existing injury compensation systems, especially those based on fault: ‘a no fault system can deliver nearly 33% more services than the fault based system for the same price’ (P 847)

› An NIIS would leave boundaries with the NDIS, and would not deal with the worst fault based systems such as medical indemnity

› The NDIS has left state based compensation systems the first source of support for injured people: NDIS is a secondary scheme.

› Possible reform steps:

- (Ideal) Make NDIS the primary support scheme, with Cwlth/State financial adjustments

- Work with States to eliminate fault based compensation, with savings dedicated to NDIS financing

- Bar heads of damages for domains covered by NDIS

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Financial impacts of NDIS for service providers

› Existing service providers are NGOs, with limited sources of funding

› The sector has strongly advocated for the NDIS, and supports it

› NDIS will require service providers to sell services, needing good billing systems and substantial working capital

› This will put great pressure on many service providers

› Could be exacerbated by new entrants to the sector

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Conclusion

› NDIS is a wonderful social development for Australia:

- the Centre for Independent Studies sees the NDIS as ‘another Medicare’ (high praise from such a source): CIS Policy Monograph 131, 2012

› There are opportunities for creative approaches and further reform of related systems

› Active examination of financial progress, and continuing policy development and reform, are essential so that the NDIS can achieve its potential.