NDIS changes tipped to save $57 billion over a decade

A tough new spending target will save billions of dollars on the National Disability Insurance Scheme by increasing the scrutiny of service providers and preventing the annual cost rising to $97 billion within a decade.

The new measures will cost $720 million over the next four years and will beef up the peak agency that oversees the providers and is charged with making the scheme more efficient.

PM Anthony Albanese announced on Friday a framework to make the NDIS more sustainable over the long term.Credit: Dan Peled

While federal spending on the NDIS is forecast to grow by up to 14 per cent over the next few years, the target seeks to bring that down to 8 per cent in subsequent years to make the scheme more sustainable for the long term.

A government calculation suggests the new measures would save $57 billion over the decade when compared with the spending that would occur under business as usual.

The calculation, provided by a government source who was not authorised to speak on the matter, highlights the political sensitivity of the changes in the May 9 budget when critics of the government may claim it is cutting NDIS spending even though the total cost is forecast to grow every year.

Annual spending on the scheme will continue to grow each year over the decade under the revised government forecasts, given assumptions that the number of recipients will double to about 1 million over the decade to 2032.

State and territory governments are committed to increasing outlays on the scheme by 4 per cent a year and the federal outlays will lift by more than this under the new plan, which means the federal share of the overall cost will steadily rise.

NDIS Minister Bill Shorten signalled last week that he wanted to toughen the oversight of service providers to prevent what he called a “wedding tax” – when services charge higher fees to NDIS recipients than they would for others.

“What makes the scheme sustainable is if participants are getting outcomes. What makes the scheme sustainable is if public trust in the scheme is high. What makes the scheme sustainable is if we deflate some of the inflationary pressure in the maze,” he told the National Press Club.

“The scheme will grow each year. That’s inevitable. I don’t see the scheme as shrinking and that’s not what we’re trying to do. But if we focus on the outcome for the participant and the maintenance and rebuilding of public trust, then I think you will end up seeing the right priorities being targeted.”

Pressed on whether services would be cut, Shorten said there was no budget pressure to make savings on the NDIS to pay for other government policies.

“I’m interested in how I make the NDIS as strong and as sustainable as it can be, providing the best opportunities for people. And at no point have I come under any pressure from the treasurer or anyone else to say that somehow we’ve got to slash and burn the NDIS to subsidise something else, because that’s not the way this government thinks.”

Shorten signalled last week the National Disability Insurance Agency, which oversees the scheme, would gain more resources to scrutinise payments. This was confirmed on Friday with the announcement that the agency would gain $720 million over four years.

The spending is intended to increase the oversight of disability plans, avoid high fees and assure recipients they will not lose money in the future if they do not spend all the money allocated to them in a given year.

Some other options include setting up a preferred provider arrangement to leverage the buying power of the scheme and cut costs.

The additional resources would help crack down on fraud, the government said, while also setting minimum standards for evidence of the assistance needed for daily living.

The previous estimate of $97 billion for the annual cost of the scheme in 2032 was revealed by ABC News last November and confirmed by Prime Minister Anthony Albanese at a press conference on Friday after a national cabinet meeting with state and territory leaders.

Albanese announced a Financial Sustainability Framework agreed with states and territories to make the NDIS more sustainable over the long term, with an 8 per cent annual growth target for the total cost of the scheme from July 2026.

“If the projections, the way that they are at the moment, continued, then the Commonwealth at the end of the medium term would be contributing 82 per cent of $97 billion in the NDIS,” the prime minister said.

“Now, the growth factor when the NDIS was introduced was anticipated to be 4 per cent, which is why the cap on spending from state and territory governments is 4 per cent.

“Now we’re not proposing to change that. We want to work in a co-operative way, but states and territories can assist obviously in that process. But we’re not trying to change that.

“We are trying, though, to recognise with an 8 per cent target by the end of the forward estimates, and then putting it on a further sustainable trajectory, to make sure that this scheme can continue to deliver – that we don’t find ourselves in a situation down the track where the viability of what is a critical scheme for Australia is drawn into question.”

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