Time to Get Real on NDIS: Data and Flexibility Are Key

It’s time to stock and develop better data in support of a more robust National Disability Insurance Scheme or the brunt of any failure will be borne by those who live with disability, writes Professor David Gilchrist from Curtin University.

The National Disability Insurance Scheme (NDIS) has been in the news over the past week as it has become increasingly obvious that we need better data and a more realistic national discussion in order to ensure that this critical initiative has the best chance of success.

If we do not take stock now and develop better data in support of a more robust scheme, the brunt of any failure will be borne by those who live with disability.

The NDIS is currently being trialed in locations around Australia and the evidence is that the initial estimates of both cost and demand are significantly off target. This is not new to many in the sector who have consistently argued that the prices offered under the NDIS are too low to ensure sustainability of the current sector let alone encourage other organisations into the sector in order to meet the expected demand increase. These results highlight that those organisations providing disability services are likely to be under considerable pressure as many may not have the financial capacity to continue providing services in a sustainable way.

The NDIS is predicated on the idea of developing a market mechanism to drive choice and efficiencies within the disability service sector. This seems a logical stance to take given the current belief in market economics that seems to pervade all of our financial discussions these days. The trouble is, there is only a single funder under the NDIS model (as such the NDIS has a monopsony—where there is only one purchaser—as opposed to a monopoly where there is only one seller). And that funder sets the prices.

Further, while the level of funding from government is set via the National Disability Insurance Agency (NDIA—the government agency charged with implementing the managing the NDIS), by and large, most people living with disability do not have the financial capacity to supplement their care costs because their living expenses are already generally higher than people without disability on similar incomes. Further, these services are not optional. People need the services and so, any prospect for supply-side failure places the recipients at considerable risk.

Much has been made of the role of Not for Profits and charities in the provision of services too. Essentially, there has been an expectation that these organisations can cut costs in order to fit into the artificially created funding envelope. While there is a growing body of evidence to show that the sector is, in fact, no less efficient than any other sector in the Australian economy, it is important to remember that there will be cases where organisations decide to opt out and discontinue services or where they will be forced to close as a result of sustainability issues.

Such an outcome is increasingly likely if we consider that the NDIS does not fund organisations to support choice. Individualised Funding and Person Centred Care is a critical policy framework which advances the opportunity for positive outcomes from the provision of care. However, it costs providers more to plan, manage and administrate at a personal rather than organisational level. While, on the one hand, this policy framework reinforces the market economics focus—that is, choices made at the recipient level—the costs of this model are higher than the cost of more traditional funding models and this must be recognised.

Perhaps it is time to de-emphasise the markets rhetoric and start looking at developing some meaningful data that will help to identify what the demand is likely to be and what the true cost of service will be. The current funding envelope of $22 billion was established as a result of calculating the money available from then-existing state government contributions and combining this with a portion of the Commonwealth’s medicare levy; it was not calculated by determining the likely cost of service delivery or demand.

Once we have a reasonable estimate of demand and a more realistic sense of the true cost of service delivery, we can then start to come to grips with the magnitude of the funding problem and develop some meaningful solutions.

Meaningful solutions will likely need action by the governments that are responsible for supporting the provision of these public goods, from the largely Not for Profit providers that will need to consider efficiencies in order to manage their resource requirements, and from the broader public in terms of developing an understanding of the pressures felt here and who could encourage governments to act with less regard to the election cycle and more regard to the medium and longer term sustainability of the NDIS.

It is not about survival of the Not for Profit disability services sector either, but, in order to manage such potential restructuring of the sector, it is important for governments and the disability services sector to develop a picture of what the sector needs to look like and to allocate resources and build capacity focused upon allowing organisations that determine to discontinue services, or which are likely to have financial viability issues, to make an orderly exit from service provision.

An orderly exit from service provision would include the controlled transfer of clients to new providers, the deliberate transfer of care staff to new employers within the sector so as not to lose experienced and trained staff to the sector, and a managed and staged winding up of the organisation itself. Indeed, managing for a soft landing will also ensure that those with disability in our community have continuity of service and support.

Such a focus would also see the NDIA and the sector revisit the drive to uniformity that seems to pervade much decision making currently. Rather than uniform funding with loadings intended to cover the costs of service delivery in particular circumstances, the model needs to facilitate decision making at the local level and orchestrate funding arrangements that will ensure ongoing viability of services. The example of remote service delivery is often raised here. However, there are a myriad of specific support services provided by small organisations to people who live with less common forms of disability. These smaller organisations are likely to struggle under the vagaries of a market system.

Overall, the collection of robust data showing likely demand and true cost of service will support better diagnosis of the problems of finance. The development of a preferred structure for the sector which can then be managed for a soft landing rather than allowing an immature market framework to impose its brutality on service recipients, combined with resources allowing such organisations to retreat from service delivery in an orderly fashion will likely see medium term sustainability rather than short term political palatability. It will also place the needs of people living with disability to the fore, which is, after all, the whole idea in any case.

About the author: Professor David Gilchrist is Director, Curtin Not-for-profit Initiative in Western Australia.