Budget Resources

Susan Pennings 

Over the past few years, participants, stakeholders, politicians and commentators have called for reform of the National Disability Insurance Scheme (NDIS) and for constraint on spending on the scheme. The 2024–25 budget papers state that legislative reforms being undertaken by the government are expected to largely offset the $15.9 billion increase in spending over 5 years projected by the NDIS Actuary (Budget strategy and outlook: budget paper no. 1: 2024–25, p. 97). The government expects its reforms will moderate this additional growth in NDIS spending by $14.4 billion over 4 years from 2024–25. Stakeholders have raised concerns about the limited detail currently available about these reforms, and about how the reductions in spending growth would be achieved.

This article provides context for the NDIS legislative reforms and Budget measures by describing the government’s recent policy measures to address Scheme sustainability and the projections of future NDIS spending without further reform. The article considers how the legislation and Budget measures may be intended to address recommendations from the NDIS Review and discusses commentary from political and sector stakeholders as to how the projected savings would be achieved.

Background

While there is widespread support for the original intent of the NDIS, there have been a variety of criticisms of how the scheme has been designed and is functioning in practice. Politicians, stakeholders, and commentators have argued the NDIS is financially unsustainable; that a significant proportion of funds are lost to fraud or overcharging by disability providers; and that the numbers of NDIS participants and levels of government spending continue to rise faster than predicted. In 2023, the International Monetary Fund recommended that the government ‘improve expenditure outcomes and contain structural spending growth in health, aged care, and the NDIS’.

A number of recent policy measures are intended to address these concerns:

• The Fraud Fusion Taskforce was established as a multi-agency partnership to more effectively detect, resolve and prevent fraud.
• New regulatory measures were introduced to prevent suppliers and providers from unreasonably charging NDIS participants more for a product or service than non-NDIS participants.
• National Cabinet has committed to develop additional ‘Foundational Supports’, which are services outside the NDIS for people with disability. These would be delivered through existing government service settings where appropriate (such as childcare and schools), and jointly commissioned by the Commonwealth, states, and territories.
• The government has committed to an annual growth target of 8% for the total costs of the NDIS by 1 July 2026. The details of how this 8% growth target would be achieved are contained in the NDIS Financial Sustainability Framework. This framework has not been made publicly available due to a public interest immunity claim by the government.

In December 2023, the final report of the NDIS Review was published. The NDIS Review made 26 recommendations with 139 supporting actions intended to make the NDIS more responsive, supportive, and sustainable. The government has stated that the highest priority recommendations of the NDIS Review are guiding their legislative and other reforms to the NDIS.

Projections of future NDIS expenses without further reforms

The 2024–25 Budget estimates that the total cost of the NDIS, including both Commonwealth and state contributions, will be $44.3 billion in the 2023–24 financial year (Budget paper no. 1, p. 211). This is higher than the $41.9 billion estimate for the same period in the 2023–24 Budget.

The budget papers report projections of how NDIS expenses would increase without further reforms. Budget paper no. 1 states that:

… payments related to the NDIS were estimated to increase by $1.3 billion in 2023–24 and $15.9 billion over 5 years from 2023–24 to 2027–28 based on revised projections from the NDIS Actuary showing increased expenditure on supports for NDIS participants, as well as other accounting adjustments. (p. 97)

These projections are based on data from December 2023 (Budget measures: budget paper no. 2: 2024–25, p. 40). This means it is based on more recent data than used in the Annual financial sustainability report 2022–23 by the National Disability Insurance Agency Board (and reviewed by the Australian Government Actuary). Further details about the budget projections by the NDIS Actuary are not publicly available.  

2024 reforms

The government has announced a process of reforms to the NDIS which is intended to moderate cost growth and return the working of the scheme to its original intent. These reforms include legislation amending the National Disability Insurance Scheme Act 2013 (NDIS Act) and measures in the 2024–25 Budget.

Legislation

The National Disability Insurance Scheme amendment (getting the NDIS back on track no. 1) Bill 2024 was introduced to the House of Representatives on 27 March 2024. The Explanatory Memorandum states that the amendments in this Bill give effect to Recommendation 3 and interconnected elements in Recommendations 5, 6, and 7 from the final report of the NDIS Review. The amendments also support the partial implementation of recommendation 17. These are:

Recommendation 3: Provide a fairer and more consistent participant pathway (p. 6)

Recommendation 5: Provide better support for people with disability to make decisions about their lives (p. 7)

Recommendation 6: Create a continuum of support for children under the age of 9 and their families (p. 8)

Recommendation 7: Introduce a new approach to NDIS supports for psychosocial disability, focused on personal recovery, and develop mental health reforms to better support people with severe mental illness (p. 8)

Recommendation 17: Develop and deliver a risk-proportionate model for the visibility and regulation of all providers and workers, and strengthen the regulatory response to long-standing and emerging quality and safeguards issues (p. 13).

The Bill provides for a new assessment process for gaining entry to the NDIS via the 2 eligibility streams – early intervention or disability requirements, or both. It clarifies what supports can be funded by the NDIS and provides for a new type of participant plan. If the Bill is enacted, all NDIS participants will transition to a new framework plan budget. Instead of being constructed from a collection of ‘reasonable and necessary supports’ as is currently the case, new plans will consist of a ‘reasonable and necessary budget’ which can then be spent more flexibly by the participant. The Bill also specifies that funds will not be paid if the payment would exceed the funding amount specified in the plan or for that funding period (p. 15).

The Financial Impact Statement in the Explanatory Memorandum for the Bill states that ‘[t]he changes in the Bill are expected to contribute to decisions made by National Cabinet to moderate cost growth of the NDIS in the medium to long-term and meet the 8 per cent sustainability target by 1 July 2026’ (p. 3).

If enacted, the implementation of the Bill would make extensive use of legislative instruments which are yet to be developed. For example, legislative instruments will determine which supports will be excluded from participant plans, and how a participant’s needs will be assessed (pp. 12–13).

The Bill is described as representing the ‘the first tranche’ of amendments to the NDIS Act, suggesting that further NDIS legislation is likely to be introduced.

Budget measures

The 2024–25 Budget introduces a new measure called ‘National Disability Insurance Scheme – getting the NDIS back on track’, which provides $468.7 million over 5 years from 2023–24 (Budget paper no. 2, p. 172). Funding includes $160.7 million over 4 years from 2024–25 (and $24.6 million per year ongoing) to upgrade the NDIS Quality and Safeguards Commission’s (NDISQSC) information technology systems and improve NDISQSC’s capability to collect and analyse data. These improved capabilities are intended to help NDISQSC protect participants from abuse, reduce the regulatory burden on disability service providers, and more effectively detect fraud. These actions may be related to the NDIS Review’s finding that the NDISQSC has ‘been constrained by inadequate information and communications technologies investment (p. 230).

This measure also provides $83.9 million over 2 years from 2023–24 to improve fraud detecting information technology systems at the National Disability Insurance Agency and $23.5 million over 2 years from 2024–25 for Services Australia to continue fraud investigation and response activities as part of the Fraud Fusion Taskforce (Budget paper no. 2, p. 172-3).

In addition, the measure provides $45.5 million over 4 years from 2024–25 (and $13.3 million per year ongoing) to establish a NDIS Evidence Advisory Committee (Budget paper no. 2, p. 172). This action is likely to be an implementation of the NDIS Review’s recommendation that the government should ‘establish a new NDIS Evidence Committee modelled on the Pharmaceutical Benefits Advisory Committee and the Medical Services Advisory Committee’ (p. 264). The Review recommended the evidence committee assess evidence-based therapies for NDIS support, including their cost effectiveness.

Budget paper no. 2 states that the government has already provided partial funding for this measure, and that additional costs will be partially met from within the existing resourcing of relevant government agencies (p. 173).

While these initiatives may be expected to contribute to moderating the growth in government spending on the NDIS, the budget papers do not quantify their financial impact. The budget measure is presented as part of the government’s broader NDIS reforms and projected savings.

With the exception of reforms to disability employment services (Budget paper no. 2, p. 168), the Budget does not include details of new large-scale measures or programs providing disability services outside the NDIS. The NDIS Review found that while the majority of people with disability rely on services outside the NDIS, these services are often unavailable or unaffordable (pp. 54-56). It also found that existing programs, such as the Information, Linkages and Capacity Building program, largely provide short-term and inadequate services (p. 57). The government has noted that significant new disability supports are in the process of development, and that it will invest $11.6 million over two years for the development and implementation of a new Foundational Supports Strategy. The Strategy will be considered by National Cabinet in the second half of 2024.

Budget savings from the 2024 reforms

Budget paper no. 1 states that the NDIS legislative reforms being undertaken by the government are expected to moderate the $15.9 billion increase in expenditure over 5 years projected by the NDIS Actuary (p. 97). These legislative reforms include the Bill currently before Parliament, and are likely to include further legislative amendments. According to Budget paper no. 1, these reforms should moderate this additional growth in NDIS payments by $14.4 billion over 4 years from 2024–25 (p. 97).

Minister for the NDIS Bill Shorten stated that 95% of the savings projected in the 2024–25 Budget would come from 2 aspects of the NDIS legislation: reducing ‘intraplan inflation’, and changing the way that plan budgets are constructed from ‘reasonable and necessary supports’ to ‘reasonable and necessary budgets’. The minister said that too many participants had been overspending their plans and then receiving additional funding, explaining that:

… intraplan inflation means that you get a plan for a period of time, say, for twelve months. What's happening is some participants are being encouraged to spend all their money within four or five months. And then there's an automatic top up. That's not on.

The minister also argued that the new framework plans would reduce NDIS costs, stating that:

What we want to do is hire trained assessors and we want to look at a person's total needs. And instead of constructing a plan brick by brick, we look at a person's overall needs and give them a budget. We estimate that's actually going to save money … If you have a whole lot of ingredients from the bottom up, you just create a whole lot of extra opportunity to see cost blowouts.

There has generally been a critical response to the announced savings from political and sector stakeholders, mainly questioning the limited detail provided by the government and how the savings outlined in the Budget papers would be achieved. The Coalition has commented that the National Disability Insurance Scheme amendment (getting the NDIS back on track no. 1) Bill 2024 ‘fails to address provider fraud and price gouging which are two major issues contributing to cost blowout within the Scheme’ and has called on the government to ‘outline how the measures in this Bill will achieve the projected savings and contribute to the overall sustainability of the NDIS’. Dr Anthony Lowe from the Actuaries Institute has also noted the lack of detail, stating that ‘[t]he government have not been very forthcoming on how much planning they've already done and what costings they've already done’, and has questioned whether the government’s process of reforms will enable them to achieve the 8% growth target for the NDIS by 2026.

Senator Jordon Steele-John, the Australian Greens spokesperson for Disability Rights and Services, has claimed that the reforms will result in the removal of crucial disability services, stating that ‘the Labor government is choosing to remove $14.4 billion in funding from the NDIS that will lead to disabled people not getting the support they need when they need it’.