$24bn-a-year National Dis­ability Insurance Scheme needs new financial sustainability plan

The ballooning cost of the $24bn-a-year National Dis­ability Insurance Scheme has prompted federal and state governments to fast-track a financial sustainability plan

The NDIS is projected to rise from $24bn this financial year to more than $40bn by 2025

The ballooning cost of the $24bn-a-year National Dis­ability Insurance Scheme has prompted the federal and state governments to fast-track a new financial sustainability plan for it amid rising concerns about its impact on their budgets.

The “NDIS sustainability work plan” will be developed by federal and state officials in the next fortnight. They will then ­deliver an interim report to federal and state disability ministers in October and a final report by year’s end.

Treasuries, both state and federal, will be asked for input into the plan, given the significant financial impact of the NDIS on government budgets.

Federal and state disability ministers agreed at a meeting on Friday that the cost trajectory of the NDIS, projected to rise from $24bn in financial year 2021 to more than $40bn by 2025, would have ­budget implications for all ­jurisdictions.

Federal NDIS Minister Linda Reynolds said it was critical to gather more information about why NDIS costs were “exponentially increasing”.

“There is now a common understanding (among ministers) that there is a serious emerging sustainability issue, and that we now need to do more work together to gain a common understanding of the cost drivers,” she told The Australian.

In July, the National Disability Insurance Agency released its annual financial sustainability report, which found NDIS spending was on track to grow to $40.7bn annually by 2024-25, $8.8bn above what the May federal budget projected for that year alone.

Across the four years to 2025, the budget was about $22.6bn short, the NDIA report said.

NDIS costs rose an average 11.8 per cent per annum in the three years to June 2021 as the total number of people with a permanent and significant disability supported under the scheme reached 467,000.

Officials have been asked to come back to the ministerial forum with greater detail on why costs are rising so fast, but there is understood to have also been an ongoing concern among states over NDIA modelling in its annual financial sustainability report. The states achieved a breakthrough at Friday’s meeting when the commonwealth, after being requested over several years, agreed to provide all data and modelling used in previous and future reports from the NDIA.

Federal NDIS Minister Linda Reynolds says it is critical to gather more information about why NDIS costs were ‘exponentially increasing’. Picture: Martin Ollman

State officials will conduct a “line by line analysis” of the data to understand the financial state of affairs, and it is understood the states have made it clear there will be no agreement to progress any of the federal government’s proposed legislative changes to the NDIS until that work has been completed.

Senator Reynolds rejected the suggestion the new sustainability work plan was required because the states didn’t trust the NDIA’s figures.

“They want to see the ­assumptions that underpin the modelling by the scheme actuary … and I think that is entirely reasonable, which is why we’ve agreed that the modelling, and the costs, historic and going forward, will be provided,” she said.

“The states and territories and the commonwealth must have a common understanding … of the problem (or) we can’t work together to implement a solution.”

There is also deep suspicion among many NDIS participants and their families that the gov­ernment is searching for justif­ications to slash their packages.

It is understood officials developing the fin­ancial sustainability plan had been tasked with consulting people with disability and key stakeholders to ensure they were involved at appropriate stages in its development.

Despite the assurance, the federal government is clearly concerned about the increasing price of the NDIS, as the longer the scheme goes on, the greater share of the cost it is bearing.

While the NDIS started as a 50-50 financial split between the federal, state and territory governments, the original agreement left the federal share uncapped while the states’ payment was capped at a 4 per cent annual increase.

The states’ increase has been significantly lower than annual cost growth in the scheme, leaving the federal government currently responsible for 55 per cent of the fast-rising costs and on a trajectory to be funding more than 60 per cent by 2025.

Senator Reynolds said there were several areas the governments would be closely examining with regard to scheme costs, including eligibility.

“We’ve now got people on the NDIS with chronic health conditions, not permanent significant disabilities as their primary diagnosis, for example people with ­dementia,” she said.

“The scheme was never ever designed for people with ­dementia. We also have to look further at the conduct of providers … because there is a lot of anecdotal evidence of gouging, and unethical behaviour, in addition to fraud.”

After a concerted campaign from NDIS participants and their advocates, Senator Reynolds last month permanently shelved plans to introduce a new “independent assessment” regime that would have required participants to re­apply for funding through interviews with people employed by the NDIA rather than through the recommendations of their health professionals.