Federal budget 2023: States ‘must pay their way’ on NDIS, says Linda Reynolds

The booming cost of the $35bn National Disability Insurance Scheme will be reined in only by forcing states to pay their fair share, former NDIS minister Linda Reynolds has warned.

Former NDIS minister Linda Reynolds. Picture: Gary Ramage

The booming cost of the $35bn National Disability Insurance Scheme will be reined in only by forcing states to pay their fair share and directly controlling the cost per participant, former NDIS minister Linda Reynolds has warned.

Labor this week announced it expected to find more than $74bn in savings for the NDIS over the decade and $15.3bn in the next four years through measures that would see more staff hired and greater oversight of participants’ plans to catch out providers overcharging for services.

It followed national cabinet agreeing last month to an annual NDIS growth target of 8 per cent by 2026, down from the current rate of growth of about 14 per cent.

But Senator Reynolds said initiatives by Labor to achieve better value for money and address price-gouging were not new, and instead called for an overhaul of the scheme.

“The first essential reform is for the 2013 NDIS legislation to be amended to provide the federal government with the ability to control both drivers of scheme costs – participant numbers and cost per participant,” she said in an online opinion article for The ­Australian.

“The federal government does this with all other demand-driven schemes, including Medicare and the Pharmaceutical Benefits Scheme. The key barrier to this reform is Labor’s 2013 legislation, which provides all states and territories with the power to veto any significant amendments before it is presented to federal parliament. The second essential reform is for all state and territory intergovernmental agreements to be renegotiated to ensure all Australian governments have an equal ­liability for all cost overruns.”

Numerous NDIS intergovernmental agreements are up for review this year, but Labor has been clear it is not looking to renegotiate the funding agreement with the states in the near term.

Currently, the growth of states’ annual contribution to the NDIS is capped at 4 per cent – as stip­ulated in the 2013 legislation.

The measure has led the cost sharing between the commonwealth and states – originally ­envisaged at 50-50 – to slip to the point where the federal government now pays about 66 per cent.

Anthony Albanese said last month the commonwealth was on track to cover 80 per cent of the scheme’s cost by the end of the decade, but his government was “not proposing to change that”.

However, Senator Reynolds revealed that, leading up to the May election, she had begun looking at how to renegotiate the operation of the NDIA and the states’ contribution. “I had started to have the discussions with the ­Department of Social Services about how we could do that,” she said. “It’s essential for the scheme to survive because states and territories have the right of veto of any reforms to control the two drivers of cost – eligibility and cost per participant.”

The former NDIS minister said making states equally liable for the annual growth of the scheme would give them a powerful incentive to better provide for disabled Australians with other supports through the education and health systems. While recognising the challenge in renegotiating the funding split, which the states would all need to agree to, Senator Reynolds said there had been a growing “recognition of the problem” from all governments.

“What really started to focus the (states’) attention is when I started asking ‘what’s going to happen when it’s either just completely unsustainable for the commonwealth?’” she said.

“What government in their right mind would renegotiate on the same terms and not actually have a cost split?”