NDIS facing $3bn blowout: Shepherd

The National Disability ­Insur­ance Scheme faces an eventual blowout of $3 billion a year, says Tony Shepherd.

Former Commission of Audit chairman Tony Shepherd. Picture: John Feder

The National Disability ­Insur­ance Scheme faces a cost blowout of $3 billion a year when it is in full operation, business leaders have warned.

Former National Commission of Audit boss Tony Shepherd said government figures had told him they were concerned the final cost of the NDIS would be “closer to $25bn than $22bn”.

His warning comes as Business Council of Australia chief executive Jennifer Westacott said the government needed to be “honest” about the risk facing the scheme, the biggest social policy program since Medicare.

While the government maintains the NDIS is on track and on budget it faces its most severe test between July this year and 2019 when it must expand from 30,000 clients to 460,000.

The warnings come as a conflagration threatens to overwhelm the scheme’s decision-makers, with federal Social Ser­v­ices Minister Christian Porter demanding board and governance changes of state and territ­ory ministers in a fashion one participant described as “crazy brave”.

“Go back to the first principles of design set out by the Prod­uctivity Commission and, if necessary, change course and ­redesign,” Ms Westacott writes in The Australian today.

Mr Shepherd said he had had talks with senior government members who expressed concern that the final cost of the NDIS would be “closer to $25bn than $22bn”.

“There is no budget control over the number of people who qualify and the size of the pack­ages of support and the commonwealth largely takes on that risk, so in effect they have signed a blank cheque,” Mr Shepherd said.

Treasurer Scott Morrison refused­ to answer questions about the $25bn figure while a spokesman for Mr Porter said: “Expert analysis based on the full range of data from trial sites shows it is currently being deliver­ed within budget.”

Ms Westacott said there were three main areas of concern in the scheme, partly the result of the race to get it legislated and under way before the 2013 federal election. “First, there is no clear and transparent spending envelope, to provide added impetus for cost discipline. This is particularly important in the early stages of a new government scheme that is being quickly rolled out,” she writes.

“Secondly, in such an underdeveloped market, we are also unlikely to see services delivered for best value. The NDIS itself has conceded that market capacity will need to increase significantly as providers transition to the new model. The third problem is that eligibility is still evolving, including major boundary issues with aged care and mental health.”

Ms Westacott said the federal government must break down how or whether the provider market was meeting demand in each NDIS region, assess the problems involving “eligibility and scope of assistance”, particularly including aged care and mental health, and include a “clear and transparent spending envelope for the NDIS” in this year’s budget and across the forward estimates.

The Australian has, over the past two years, revealed serious flaws in the implementation of the NDIS which include how it will involve children with developmental conditions, long delays to its $700 million housing framework, lack of market development and nebulous eligibility criteria.

At the disability ministers’ meeting on Friday, Mr Porter made a proposal — linked to early access to Medicare levy funds — which would give the federal government control of the NDIS by changing the scheme’s act to allow commonwealth intervention on eligibility and other rules.

Labor disability reform spokeswoman Jenny Macklin said it was “a really crucial period for the NDIS and it is critical that the Turnbull government make it a priority. We need answers on housing, on a national quality framework and a proper workforce strategy, and more attention needs to be given to sector development.

“This is where the government’s focus should be, not on picking fights with state governments or the board.”

But “God is in the detail” said Mr Shepherd, who acknowledged that the NDIS was a “good idea” that had to be “properly controlled and constructed”. “This was a fantastic deal for the states … they will get as much (of their own services) as they possibly can into the NDIS,” he said.

Mr Shepherd said it would be a “triumph of hope over reality” if the scheme paid for itself as modelled by the Productivity Commission. “We do not have a never-ending supply of money to fund these programs, we are already in deficit ... and the NDIS hasn’t even kicked in properly yet,” he said.

People with Disability Australia president Craig Wallace said Mr Porter had “insisted time and again … there is no blowout in the scheme” and “I take him at his word’’.