Curtailing NDIS cost growth is Bill Shorten’s challenge of the ages

Bill Shorten is under the gun to rein in the scheme’s costs and deliver better outcomes for participants.

Disability generic

It started with a frank, and frankly terrifying, speech. On April 18 the man responsible for the National Disability Insurance Scheme told a national audience in a televised address that the scheme had “lost its way”.

“The NDIS is not what it should be. It is not delivering the outcomes Australians with disability need and the Australian public expects,” Bill Shorten told the National Press Club in Canberra. “For the NDIS to reach its potential, it needs a reboot.”

Less than a month out from Labor’s budget, his words rang loud, and so they should.

The NDIS is monumental in scale, costing the taxpayer about $200bn across the four-year forward estimates. It is the federal government’s third biggest spending program and its fastest growing. The abbreviation doesn’t do it justice. We’re talking $200,000,000,000.

The scheme is also monumental in impact, life-changing for millions of Australians, the 600,000 NDIS participants along with their families and loved ones. Working well, it provides Australians with permanent and significant disability the means to their best life. Those who don’t believe in it are only a car accident away from depending on it.

In his press club speech Shorten said the scheme was “as fundamental to our social democracy as Medicare and universal superannuation, fair pay and the pension”.

That a program of such scale, and providing such critical support to some of the nation’s most vulnerable, had “lost its way” was a huge admission by the NDIS Minister. He blamed the previous government’s “malign neglect” of the scheme, but it’s now on his watch.

Shorten said he couldn’t wait for the outcome of the independent review into the NDIS he commissioned late last year (bringing it forward by a year) and due to report in October, a review charged with examining the scheme’s sustainability. It was battle stations now to get the NDIS back on track.

In his “state of the union address on NDIS” just over a month ago, Shorten announced a six-point plan to drive both spending efficiency and better experiences for participants.

It included more and better qualified staff in the body running the scheme, the National Disability Insurance Agency. Shifting participants on to longer-term plans. Improving the experience of that vulnerable cohort of people with disability requiring highly intens­ive and expensive supported independent living. And cracking down on gratuitous overcharging of products and services through the NDIS, the so-called wedding tax.

NDIS Minister Bill Shorten has announced a six-point plan to drive both spending efficiency and better experiences for participants. Picture: Lyndon Mechielsen/Courier Mail

The backdrop to Shorten’s April reboot was growing public concern that the scheme simply was not as had been advertised. What had been envisaged originally by the Productivity Commission in 2011 as an insurance scheme that would support about 410,000 people with disability at its peak is now running far ahead of that. Scheme participants currently total 600,000, with projections in the NDIA’s latest quarterly report that the number could exceed one million by 2032.

The projected scheme cost for that year was almost $90bn. Each new financial projection seems to be adjusted upward. With cost growth running at an alarming 14 per cent a year, accusations bubbled up that the scheme was becoming a bottomless pit of public money, ripe for exploitation.

For participants, too, the NDIS was not operating as billed. Advocates talked of the trauma and anxiety of repeatedly having to justify their disability and the services they needed, even when their condition and their goals remained constant across the years.

Every time a review was conducted, time and money were wasted on having reports prepared to tick boxes, even in obvious cases. And there were many stories of participants battling for the right to have what would appear to be obvious supports included in an NDIS package.

Finding a sustainable path forward was crucial not only for the future of the scheme but potentially also for the broader economy.

Shorten had already acknowledged these concerns in setting in train the review, co-chaired by long-time disability advocate Bruce Bonyhady and experienced company director and federal public servant Lisa Paul. But having said he was moving to action before it reported, the May budget loomed as the next step for NDIS reform, with some flesh to be put on the bones of his plan.

It was not to be. On April 28, Anthony Albanese emerged from national cabinet, flanked by state and territory leaders, with a new financial sustainability framework for the NDIS.

The NDIS, joint funded by the federal government and the states under a deal in which the federal government currently pays about 66 per cent of scheme costs (with the federal share rising each year), would have a new cost growth target of 8 per cent to be met by 2026, the Prime Minister said, down from the current 14 per cent growth. Hopefully it would moderate even further in subsequent years, the framework said.

Anthony Albanese is flanked by state and territory leaders after emerging from national cabinet with a new financial sustainability framework. Picture: NCA NewsWire / John Gass

“That trajectory projects some $97bn on the NDIS over the ­medium term, so, in 10 years’ time, when you look at the budget framework, that is simply not sustainable,” Albanese said.

The disability sector was stunned by the surprise announcement and the new target, concerned it was effectively capping the cost of a scheme that was supposed to be demand-driven, so if people required “reasonable and necessary” support, they got it.

Shorten was confronted by leaders in the sector, assuring them it was a target only and not a cap.

The Prime Minister’s intervention coincided with a pre-budget announcement from Shorten, listing a new spending program of $720m across four years, tied to his six-point plan, to “ensure every dollar (of NDIS funding) goes to support people with disability”.

The budget itself put numbers around what the new NDIS programs would do to curtail cost growth, saying the NDIA scheme actuary projected it would slow scheme spending by $15.3bn across the four years from 2023-24 and a further $59bn to 2033-34.

Even with an 8 per cent annual growth target the NDIS would still be the fastest growing federal payment program, the budget said.

In an interview with Inquirer, Shorten says he is confident the new programs, ticked off by the independent review, can both moderate NDIS cost growth and deliver better experiences and outcomes for scheme participants.

And that is without factoring in any benefit from his crackdown on fraud through his Fraud Fusion Taskforce, which is investigating hundreds of millions of dollars in potentially dodgy payments.

Shorten says that working off a base of $200bn in NDIS spending across the next four years “we think we can improve the effectiveness of the scheme by about 7.5 per cent”. The minister takes a program of new spending to boost capability and systems within the NDIA as an example. The cost is $429m across four years, the scheme actuary’s projected saving is $3.1bn.

“This is an investment in productivity,” Shorten says.

“If you’ve got more specialised planners, if you’ve got more depth in the agency, you just get better quality decisions. Three billion dollars is a lot, but that’s a 1.5 per cent improvement.

“I do think that having a better-run agency could improve the efficiency of the operation and outcomes for participants by 1.5 per cent.”

A critical area up for change is supporting participants to better manage their plans, which includes a decision to have less frequent plan reviews.

The scheme actuary has projected a $73m spend across four years can reap a whopping $7.2bn in savings.

Shorten says because the cost of plans generally increases with each review, savings can be made.

“Longer plans … will provide some moderation in cost growth. Is it three years? Is it five years? You can co-design how you do the planning process, how you look at whether or not people are suitable for longer plans. The decision to have a longer plan is what the sector has been telling me for years.”

Supported independent living is another area of the scheme where Shorten says savings worth $700m can be made and at the same time deliver better outcomes for one of its most vulnerable cohorts.

There are about 30,000 people on a SIL package, which averages $360,000 a participant each year. Total payments to participants in SIL have increased by 22 per cent annually across the past three years, from $5.5bn to $9.9bn.

Shorten says some shonky operators have been “mining” people’s SIL packages.

“It’s so lucrative getting someone’s SIL package that (some operators are) renting a house off Domain.com, then charging each tenant that rent, basically subletting it and making the margin. And they’re also charging the person’s package but not delivering the quality of service.”

Shorten says while the measures he has outlined in the budget should take the NDIS to its projected cost growth target, he recognises there is still much work to do to ensure the scheme is delivering “reasonable and necessary” support to those with “permanent and significant” disability, the core of the scheme. He is leaving this to the review. It will be the key to long-term cost control.

“The review will deal with issues around clarity about what permanent severe functionality is and certainly we will need to belt and brace what reasonable and necessary looks like, no question.”

But he consistently has flagged that the NDIS can’t be “the only lifeboat in the ocean” for people with disability, a message for states that have stepped away from service provision in health and education, especially in the area of children with developmental delay who don’t need a full suite of NDIS supports to live their best life.

“The reality is that the NDIS alone can’t empower all Australians with disability,” Shorten says.

“There are many Australians with disability who neither seek to be on the NDIS and it was never intended for them. But that doesn’t mean that everyone else can down tools and leave everything to the NDIS.”