2.1
This chapter provides background on key matters and concepts relating to funding, forecasting and financial sustainability of the NDIS, and discusses key concerns raised in evidence relating to actuarial modelling for the scheme.
2.2
Key issues raised included that:
the scope of the actuarial reviews should be broadened, to seek to explore the drivers behind areas of scheme growth; and
discussions of costs should be accompanied by work measuring and explaining the economic benefits of the scheme.
NDIS funding
2.3
The NDIS is funded through a pooled approach between the Commonwealth and state and territory governments, with the latter’s contributions based on bilateral agreements with the Commonwealth.
2.4
The operation of the bilateral agreements, as well as scheme costs and funding are scheduled to be reviewed every five years, with the current agreements all ending by December 2023.
2.5
Each state and territory government contributes cash payments and in-kind services equivalent to what they would have paid if the NDIS was not established. The Commonwealth is then responsible for the balance between the total NDIS costs and state and territory contributions, including any costs outside those agreed in the bilateral agreements. The Commonwealth Government currently contributes more than half of total costs for the scheme.
2.6
A table which outlines when each state and territory’s bilateral agreement commenced with the Commonwealth, along with a breakdown of estimated state and territory annual contributions to the NDIS from 2018 through to 2023, is available at Appendix 3.
2.7
The figure below also depicts the state, territory and Commonwealth government contributions to the NDIS in 2019-20 and 2020-21, according to the Productivity Commission’s Report on Government Services 2022.
2.8
Most expenditure on the NDIS is on participant costs. According to the NDIA’s September 2021 Quarterly Report, in 2020-21 participant costs amounted to $23.2 billion. For comparison, costs in 2019-20 and 2018-19 amounted to $17.6 billion and $10.5 billion respectively.
2.9
Part of the Commonwealth’s contribution comes from the DisabilityCare Australia Fund, with other Commonwealth NDIS expenditure provided from consolidated revenue or borrowings.
Proposed NDIS Reserve Fund
2.10
The Productivity Commission recommended the NDIS be established with 'a large enough reserve fund to smooth out fluctuations and reduce uncertainty' when it presented its initial report suggesting the scheme in 2011. The Commission described that this reserve:
… would act as a buffer against unpredictability, and avoid the Australian Government needing to inject additional funds from general revenue when claim costs were higher than expected in a given year.
2.11
The Commission reiterated this recommendation in its 2017 study of scheme costs:
Governments should commit now to providing a pool of reserves for the National Disability Insurance Agency. The pool should build up gradually over time, with the target amount based on an actuarial and economic analysis of the optimal level of reserves.
2.12
In correspondence provided to the committee in August 2021, Minister for the NDIS, Senator the Hon Linda Reynolds CSC, informed the committee that the Australian Government had not yet established an NDIS Reserve Fund because the matter had been referred to the Council of Federal Financial Relations (CFFR) 'as part of the broader review of existing funding arrangements between the Commonwealth and the states', and explained that:
…the CFFR will further consider the implementation of the Reserve Fund once states have submitted advice on the design of the Reserve Fund to CFFR, or indicated they will not be doing so.
In the meantime, current arrangements continue whereby unspent NDIS contributions from the Commonwealth and the states remain with the National Disability Insurance Agency.
2.13
In its final report for its inquiry into Independent Assessments, the committee noted its concern that the Reserve Fund had not been established.
Financial sustainability
2.14
The NDIS Act requires that, in giving effect to the objects of the Act, and in the performance of functions or exercise of powers under the Act, regard is to be had to the need to ensure financial sustainability of the scheme. The NDIA's functions under the Act also include managing, advising and reporting on financial sustainability.
2.15
The NDIS Act itself does not define 'financial sustainability', however, the NDIA has developed a definition, which is set out in the NDIS Insurance Principles and Financial Sustainability Manual (Insurance Principles Manual), dated November 2016.
2.16
In the Insurance Principles Manual, 'financial sustainability' is defined as:
a state where:
the scheme is successful on the balance of objective measures and projections of economic & social participation and independence, and on participants’ views that they are getting enough money to buy enough goods and services to allow them reasonable access to life opportunities – that is, reasonable and necessary support; and
contributors think that the cost is and will continue to be affordable, under control, represents value for money and, therefore, remain willing to contribute.
2.17
The Insurance Principles Manual further sets out a 'Prudential Governance Framework' through which the Board will monitor and report on financial sustainability as defined. The components of that framework are set out in Appendix 4 and include:
the NDIA having access to a 'person centred longitudinal database' to support the operational work of the Agency and supply the Scheme Actuary with sufficient data to perform their functions under the Act
investment in early investment, research, innovation and the development of social capital across the NDIS
development of an 'actuarial monitoring framework' and 'resource allocation framework'
assessment and reporting on annual costs of support for participants and scheme financial sustainability
management of scheme sustainability and recalibration of requirements.
Productivity Commission comments on Financial Sustainability
2.18
As noted in Chapter 1, the Productivity Commission (Commission) was asked to look at 'scheme sustainability' of the NDIS in its 2017 study of scheme costs. It interpreted 'scheme sustainability' as 'financial sustainability', in line with requirements under the NDIS Act.
2.19
The Commission reflected on the 'unique inherent financial risks' in the scheme and considered that 'achieving financial sustainability required continuous monitoring of both participants' outcomes and costs'. The Commission also emphasised that, while the scheme is demand driven, and has been described as 'uncapped', the ultimate 'cap' is the willingness of Australian taxpayers to continue to pay for the scheme, and that this willingness will depend on perceptions that the scheme represents value for money. Actuarial estimates of scheme costs over the longer term were seen by the Commission as an important tool for demonstrating this value.
Insurance principles of the NDIS
2.20
To understand financial modelling and forecasting of the NDIS, it is important to understand the insurance basis of the scheme. The NDIS is based on social insurance principles—in that it uses actuarial estimates of long-term and lifetime costs, and is based on the concept that support, investment and early intervention may help the long-term functional capacity of people with disability. It is not means tested and, like many other Australian Government social policy programs—such as Medicare and the Pharmaceutical Benefits Scheme—it is an uncapped, demand-driven scheme.
2.21
The Productivity Commission noted that the insurance approach to the scheme and financial sustainability are 'inextricably linked'.
2.22
The NDIS Insurance Principles Manual sets out insurance principles to be governed by the NDIA Board, within the above prudential framework for monitoring, assessing, reporting on and managing the sustainability of the scheme. As summarised by the Department of Social Service (DSS) and NDIA, the 5 principles are:
(1)
Evidence-based decision making
(2)
Consistency in decision making
(3)
Regular monitoring of experience to manage emerging risks
(4)
Lifetime and person-centric approach
(5)
Early investment to drive lifetime participant outcomes.
NDIS modelling and forecasting
2.23
Current and former modelling and forecasting of expenditure in the NDIS is set out in a range of sources, including:
the Productivity Commission's 2011 report: Disability Care and Support;
Government Budget documents, including Budget Statements, the Mid‑Year Economic and Financial Outlook and Portfolio Budget Statements;
Treasury projections, including Intergenerational Reports; and
Analysis by the NDIS Scheme Actuary, as required under the Act.
Scheme Actuary and Reviewing Actuary
2.24
The NDIA Board is to nominate a Scheme Actuary under section 180A of the NDIS Act. The duties of the Scheme Actuary are set out in section 180B of the NDIS Act. The Scheme Actuary is responsible for, among other things, assessing the financial sustainability of the NDIS.
2.25
Under section 180D of the NDIS Act, the NDIS Board must also nominate a Reviewing Actuary, which section 180E of the NDIS identifies, is responsible for, among other things, reviewing and reporting to the Board on actuarial reports and advice received by the Board.
2.26
Ms Sarah Johnson was nominated as Scheme Actuary in November 2013 and Mr Guy Thorburn was nominated as Reviewing Actuary in February 2020. At the time of drafting this report, both officers continued to hold these roles.
Annual Financial Sustainability Reports
2.27
Under the NDIS Act, the Scheme Actuary is required to fulfil a number of duties relating to Annual Financial Sustainability Reports (AFSRs) for the scheme. Section 180B provides that the Scheme Actuary must:
assess the financial sustainability of the NDIS, risks to that sustainability, and any trends in provision of supports to people with disability
consider the cause of those risks and trends
make estimates of future expenditure of the NDIS; and
prepare a report (and summary) of that assessment, consideration and estimation.
2.28
The AFSRs were previously provided only to the NDIA Board, with summaries included in NDIA Annual reports. However, in 2021, the NDIA agreed that the next AFSR would be made publicly available in full. The 2020‑21 AFSR was publicly released in October 2021.
2020-21 Annual Financial Sustainability Report
2.29
The 2020-21 AFSR forecasted significantly increased scheme costs compared to previous projections, including previous AFSRs, 2021-22 Portfolio Budget Statements and estimates of scheme costs from the Productivity Commission in 2011 and 2017.
2.30
The report primarily attributed the projected increased costs to significantly higher numbers of NDIS participants than previously forecasted (which was found to, in turn, be driven by increased rates of new entrants and lower than anticipated exits from the scheme) and increases in average payments per participant.
2.31
The table below sets out the projected participant costs from 2021-22 to
2029-30, as forecasted in the 2020-21 AFSR.
Table 2.1: 2020-21 Annual Financial Sustainability Report participant cost projections
|
|
|
|
|
|
|
|
Projected participant costs (accrual basis)
|
$29.2
billion
|
$33.9
billion
|
$38
billion
|
$41.4
billion
|
$59.3
billion
|
Source: NDIA, Annual Financial Sustainability Report 2020-21, October 2021, p. 14.
2.32
When compared to estimates in the previous AFSR (December 2020), the new projections are approximately:
$3.9 billion higher for the years from 2021-22 to 2024-25,
$1.0 billion lower in 2029‑30;
$12.9 billion higher in 2024-25.
2.33
The 2020-21 AFSR projections for participant costs are approximately $21.2 billion higher for the year 2029-30, than estimated by the Productivity Commission in its 2017 report.
2.34
The 2020-21 AFSR made 16 recommendations to the NDIA, intended to 'manage identified risks and achieve greater certainty in relation to the long‑term financial sustainability of the Scheme'. The recommendations covered the following broad topics:
embed insurance principles in NDIS culture and communications
focussing on participant outcomes
consistent and equitable agency decision-making
scheme scope and coverage; and
improving operational processes.
2.35
The full set of recommendations made by the Scheme Actuary in the 2020-21 AFSR is set out in Appendix 5.
Taylor Fry Report: Review of NDIA actuarial forecast model and drivers of Scheme costs
2.36
In August 2021, Commonwealth, state, and territory Disability Ministers commissioned work to understand the cost drivers and underpinning assumptions in the NDIS AFSRs.
2.37
Data analytics and actuarial firm Taylor Fry was contracted by a team of officials, headed by the Victorian Government, to verify the Scheme Actuary’s 2020-21 AFSR and to explore the drivers of growth in cost as well as to compare the projections against the 2018-19 and 2019-20 AFSR estimates.
2.38
The final report was presented to Disability Ministers in December 2021 and published in late January 2022.
2.39
Overall, Taylor Fry found the projections in the AFSR to be reasonable and observed that baseline estimates in the AFSR may represent a moderate underestimate of the expected value of future scheme costs. The main factors contributing to this conclusion were:
continuing high numbers of scheme entrants.
the risk of low ongoing exit rates
the assumed reduction in base inflation; and
the potential for higher ‘superimposed inflation’.
2.40
The report also highlighted key matters for consideration going forward:
the need and value of improved and objective data – particularly on functional capacity and participant support needs
scheme entry rates compared to original design – given the largest driver of participants numbers are children aged 0-14
the planning process – given planners are responsible for multiple steps and whilst this creates efficiency, it reduces the level of cross checking and therefore consistency in decision making
the role and evidence of early intervention – Taylor Fry considered more work to understand the effectiveness of early intervention and capacity building in the NDIS would be valuable; and
scheme exits – Taylor Fry considered that additional research to explore exit rates would be valuable.
2.41
Additional matters raised in Taylor Fry's report, including observations on variations in scheme costs across different regions in Australia, are discussed in the following chapters of this report.
Productivity Commission comments on modelling and forecasting
2.42
The Productivity Commission in 2017 identified challenges in the projection of scheme costs. In particular, at the outset of the scheme good data about potential participants who were not already receiving disability support services was not available. Likewise, there was no available comprehensive data on the level of funding needed to achieve good long-term outcomes for most disability types.
2.43
The Commission outlined the modelling approach it took in 2011, which relied primarily on information in the Australian Bureau of Statistics’ 2009 Survey of Disability, Ageing and Carers. Other sources were used to estimate average per person costs of support, including state-based accident and insurance schemes. In 2011 the Commission estimated net costs of a mature scheme (around the year 2050) would be $4.4 billion, anticipating long-term savings for the scheme attributable to early interventions and capacity building.
2.44
In 2017, the Commission compared these costs to the then current NDIA projections. It found that differences in projects were mostly due to:
including people with disability aged over 65 in projections.
2.45
While the Commission identified emerging scheme cost pressures in 2017, it also considered that costs were 'broadly in line with the NDIA's long-term modelling estimates', noting that the increased numbers of children entering the scheme had been more than offset by low levels of utilisation of the funding in participants' plans. However, the Commission warned of risks to the financial sustainability of the scheme if costs pressures emerging from the trials and transition were not addressed. The Commission identified NDIA initiatives such as the then named 'Early Childhood Early Intervention' approach, and the use of reference package data in the planning process as measures that it considered could be effective to manage these pressures but could not be conclusively assessed at the time of the Commission's study.
Economic benefits of the scheme
2.46
In 2017, the Productivity Commission recognised the costs of the scheme 'cannot be considered in isolation of the benefits'. The Commission devoted a whole chapter of its study report to scheme benefits, emphasising that realising the benefits of the NDIS 'is critical, not only for the wellbeing of people with disability and their families and carers, but also so the community continues to be willing to pay for the NDIS'.
2.47
The Commission considered that the economic benefits generated by the scheme would 'significantly exceed' additional costs of the scheme. These expected benefits included improved wellbeing and increased economic participation for NDIS participants, and their families and informal carers, efficiency gains and cost savings in the disability support system, and savings to other government services.
2.48
Initial evidence from trials considered by the Commission indicated improved wellbeing for participants and carers, and that most participants were accessing more supports under the NDIS than under previous systems. However, at the time of drafting its report, the Commission noted that it was 'too early to assess whether the expected benefits of the NDIS [were] being realised'; rather, many benefits of the NDIS were expected to be realised over the long term.
Submitter and witness views
NDIS funding
2.49
The nature of NDIS funding was relevant to this inquiry particularly in terms of the Commonwealth's responsibility for funding 'cost overruns' under the scheme. During the inquiry into independent assessments, the Minister emphasised that the Commonwealth's contributions to the scheme were projected to increase from approximately 50 per cent to 61 per cent of scheme costs. It was further indicated that future predicted escalations in scheme costs may need to be built into the renegotiation of bilateral agreements between the Commonwealth and the states for the continued operation of the scheme.
2.50
In its 2017 report on scheme costs, the Productivity Commission was mindful that certainty of funding was required to allow the scheme to 'operate in line with insurance principles', including taking a lifetime approach to the needs and support arrangements for people with disability. The Commission also highlighted the importance of ensuring predictable funding for the scheme so that people within and outside the NDIS have certainty that they will receive the supports they need—either for their current disabilities or if they acquire disabilities in the future.
2.51
The committee has not had the time to undertake detailed consideration of NDIS funding mechanisms as part of the inquiry during this Parliament. The committee therefore encourages a re-established committee to consider this matter further in a future Parliament. The committee also expects that these matters will be considered in the upcoming review of scheme costs conducted in accordance with the bilateral agreements between the Commonwealth and the states and territories.
NDIS reserve fund
2.52
A range of views were put forward about the need for a pool of 'reserve funds' for unanticipated expenses. As noted above, the Productivity Commission had envisaged the creation of such a fund in 2011, and again recommended the creation of such a pool in 2017, noting that other insurance schemes often rely on such reserve funding. Further, the Productivity Commission argued that the creation of an NDIS reserve fund would demonstrate that the scheme is intended to be enduring and allows for the types of upfront investments appropriate to incorporate into a lifetime insurance approach.
2.53
While some submitters were supportive of establishing a reserve fund, particularly to ensure provider of last resort services, others argued that such a fund is not needed noting the current arrangements for the scheme as a government funded social insurance scheme.
2.54
The committee may revisit this matter in a future parliament if evidence suggests this remains an issue of concern. In the meantime, the committee considers that the matter of establishing a reserve fund for the NDIS should be included as a specific consideration of the upcoming review of scheme costs.
NDIS modelling and forecasting
2.55
As noted in the committee's interim report, the release in December 2021 of the full AFSR for 2020-21 was overall welcomed by submitters and witnesses participating in the inquiry. Likewise, the committee heard that the Taylor Fry report examining the assumptions underpinning the actuarial model was valuable for increasing understanding of the scheme and should be commissioned annually.
Concerns raised about the scope of actuarial modelling and the review of the model
2.56
The committee held two public hearings to explore community views in relation to the actuarial modelling for the scheme and the then recently released Taylor Fry Report. A primary concern raised in those hearings was that, while these documents provide valuable insight into the modelling underpinning the scheme, they present information about costs, including increasing costs for the scheme, without examining the underlying causes of any costs increases.
2.57
Professor Bruce Bonyhady, Executive Chair and Director of Melbourne Disability Institute, urged the committee to recommend further work on understanding higher-than-expected numbers of participants in the scheme and increased costs of individual packages over time:
Until we have that analysis and understand the underlying causes, it is in fact impossible to know whether the higher-than-expected costs which are now being forecast are due to one-off factors or whether they are due to ongoing trends. As a result, there is a very low level of confidence attaching to the financial forecasts and there is little insight into the most appropriate policy responses.
2.58
Professor Bonyhady argued that independent research is needed to understand these factors, and outlined key areas of focus for future independent research:
…the clear focus for this independent research needs to be on the higher-than-expected number of scheme participants, who are almost exclusively children. Why are more children coming into the scheme than was expected?…
Similarly, when it comes to what Taylor Fry refer to as superimposed inflation, it is not clear whether this is due to the fact that the initial funding given to people was too low, whether they've got a progressive condition and therefore higher funding is required, whether it's due to people with disability moving out of the family home, or whether it's due to parents wanting to resume either part-time or full-time work and therefore being less able to provide informal care…
Similarly, there are behavioural effects at work here—very important behavioural effects affecting the demand. What the Taylor Fry report shows is that people who should in fact be receiving very small packages of, say, around $5,000 are actually receiving $15,000 in many cases. So there is a real cliff at the edge of the scheme.
2.59
Ms Kirsten Deane, General Manager, Melbourne Disability Institute, also explained that this research should be done using data in addition to that held by the NDIA, and also emphasised the need for independent researchers:
…not everything that we need to know can be found in the NDIS data. Some of it will need to be found by talking to participants, talking to families, talking to providers, particularly if you want to analyse behavioural trends…I would strongly suggest that that would need to be done independently of the agency so that people felt free and comfortable to talk about their experience in a way that wouldn't concern them by having any repercussions for them.
2.60
The committee also heard that actuarial modelling for the scheme should also consider benefits arising from the scheme, which is discussed further below.
Specific concerns raised about the AFSR modelling approach
2.61
Key concerns about the modelling undertaken in the AFRSR that were brought to the committee's attention included that the approach does not:
build in capacity building and early intervention into its cost projections
sufficiently disaggregate modelling in certain areas; or
examine or take into account interactions with mainstream services.
Capacity building and early intervention
2.62
As noted earlier in this chapter, the insurance principles adopted for the NDIA emphasise a lifetime approach to a participant's support needs. In accordance with this approach, early intervention and capacity building supports are important features of the scheme. The committee heard, however, that the actuarial modelling in the scheme should incorporate 'greater appreciation of the financial impact for the NDIS of the lifetime nature of participant's support packages', noting that 'supports provided to improve long term functioning will in many cases reduce the need for future supports'.
2.63
In its review report, Taylor Fry observed that:
Capacity building costs are 18% of total payments, with CB Daily Activities alone being 12%. …
For the vast majority of participants, it is too early to tell if the capacity building services will meet their objectives or not, but it is crucial that the outcomes of these programs are monitored. If the programs are successful, then this investment should lead to reduced core support costs for many participants and potentially more investment in similar programs…
The projection model assumes growth in both core services and capacity building costs per participant. For the reasons stated above, if the NDIA has the proper controls in place then from around 2025 onwards when capacity building outcomes should be well understood the model is likely to overstate aggregate expenditure in this context.
2.64
Taylor Fry noted that their examination of scheme data had found 'little obvious evidence' of supports resulting in reductions of need in later years, but that it may be too early in the life of the scheme to expect to see such reductions. They concluded that work to 'better understand the effectiveness of early intervention and capacity building in the NDIS would be valuable' highlighting that:
the process by which such future savings could be measured and assessed is unclear, even when more data accumulates. While some outcomes are tracked (e.g. rates of employment), other outcomes are potentially more subjective (e.g. achieving goals for community participation) and it is difficult to tie these to specific interventions. Similarly, decreases in committed supports are difficult to attribute to earlier upfront spending.
Disaggregation
2.65
Dr Richard Madden and the Melbourne Disability Institute called for further disaggregation in the modelling for the scheme. Dr Madden noted that the disaggregation in the AFSR is currently 'insufficient… to assist policy makers and stakeholders'. Professor Bonyhady, explained that the Taylor Fry report used the concept of 'superimposed inflation' as a catchall for cost increases above inflation, and that the concept requires further research to understand which of the various reasons for potential increases in plans are significant drivers for this figure.
2.66
Professor Bonyhady also urged for more disaggregation around individual disability types to better understand where support needs might be rising, and for disaggregating the model to examine different areas, for example, examining where capacity building is having the greatest impact.
Interactions with mainstream services
2.67
Dr Richard Madden also told the committee that the AFSR should include analysis on the role of mainstream services for people with disability:
People with disability are entitled to mainstream services like anybody else in the community… that's a matter for substantial analysis by the NDIA and also as a research topic. Those mainstream services are budget limited—they're not entitlement schemes like the NDIS—and there would inevitably be some pressure on those services to leave things to the NDIA because of the entitlement approach, so that needs to be carefully evaluated. The fact that they're largely state services—and the NDIA, at least at the margin, is Commonwealth funded—adds to the need for that review.
2.68
Other specific concerns raised with the committee included:
that the modelling should examine payments in real terms; and
there is an unclear basis for some figures in relation to costs for participants in supported independent living.
Transparency
2.69
In its 2017 report on Scheme costs, the Productivity Commission noted the importance of transparency in data sharing arrangements to ensure trust in the scheme. The committee however heard that it can be difficult to access funding information about the scheme, with some submitters highlighting the importance of ensuring this information is available in various accessible formats, for a broad range of audiences. For example, while noting that an easy-read format of the Taylor Fry report had been released, the committee heard that it was 'not particularly easy to find'.
2.70
In the committee's interim report, it noted that a wide range of submitters had called for more transparency and access to the data used in the NDIA's actuarial modelling. Submitters and witnesses continued to raise this issue in the evidence received early in 2022.
2.71
For example, following the release of the Taylor Fry report, Dr Richard Madden suggested that the data provided to Taylor Fry to allow it to perform its analysis should be provided more broadly to researchers.
Economic benefits of the NDIS
2.72
At a public hearing, DSS confirmed that the government is not currently undertaking work to model the economic benefits of the NDIS but noted work that had been commissioned by the sector – outlined in a report prepared by the Per Capita thinktank which was published in November 2021. This report, False Economy: The economic benefits of the National Disability Insurance Scheme and the consequences of government cost-cutting, proposed a method for estimating the economic value of the NDIS through applying a multiplier to NDIS spending, estimated through analysis of models used to determine the economic benefits of healthcare spending.
the NDIS employs over 270,000 people in over 20 different occupations, and contributes to the employment of tens of thousands more workers indirectly;
the economic impact of the scheme is likely very large, even compared to other types of government spending. A conservative estimate of the multiplier effect of the NDIS would be in the range of 2.25; and
such a multiplier effect would mean that the economic contribution of the NDIS in 2020-2021 is around $52.4 billion.
2.74
Per Capita estimate that underspending on the NDIS will have significant consequences. Every $1 billion that the NDIS is underfunded is estimated to result in:
a drop in employment of around 10,200 jobs, reducing the employment rate by 0.1%;
a decline in total economic activity of $2.25 billion; and
0.14% reduction in total GDP, or a 0.22% reduction in the services economy.
2.75
At a public hearing in March 2022, Per Capita emphasised that the report demonstrates that 'rather than being seen as a cost [the NDIS] should be seen as an insurance scheme, as an investment with returns to the broader community'. The authors also reflected that they did not dispute any part of the modelling in the AFSR or review by the Taylor Fry report that discusses increases in numbers of participants and increases in costs associated with the NDIS. Ms Emma Dawson, Executive Director, Per Capita, explained that:
as the scheme grows, as more people enter the scheme and as the scheme matures, the headline cost of the scheme will increase, but so will the benefits, and the benefits actually increase at a faster rate than the investment. If I could ask one thing, it would be to change the word 'cost' to 'investment' in this debate. We are investing in people through this scheme. It is a world-leading way of doing that through the insurer system and by giving people choice and control.
2.76
Reflecting on the evidence that the growth in scheme participants appears primarily due to increased numbers of children in the scheme, Per Capita also argued that, from an actuarial point of view 'those rates shouldn't be of concern' because investment in lifelong support for children on the NDIS will 'reduce other lifetime government support costs for those children'. Ms Dawson explained:
…my own understanding of the scheme, and the work that we've also done in the benefits of investment in early childhood education and care, would indicate that the benefit for children is even greater than it is for adults. You're talking about early intervention with children who previously would have had very little support through the pre-existing schemes—particularly those with neurodiversity and other intellectual disabilities. That enables them to participate more fully in school and in early childhood education.
We know that every dollar invested in children's early childhood education and intervention under the age of five returns $2 over that child's lifetime for children without disability. For children with disability, the multiplier is almost certainly closer to $3.
2.77
Per Capita also told the committee that similarly high multipliers to estimate the benefits of NDIS spending could be applied to NDIS supports for people over 65.
Government view
Financial Sustainability
2.78
In a supplementary submission DSS and the NDIA explained that the 'Commonwealth is committed to ensuring the NDIS is fully funded, and recognises the importance of a financially sustainable scheme in providing certainty for participants and providers, and improving long-term outcomes for Australians with disability'. The NDIA and DSS emphasised the commitment by Commonwealth, state and territory Disability Reform Ministers to 'develop a shared understanding of cost drivers and underpinning assumptions in the AFSR', and noted the review undertaken by Taylor Fry as part of this work.
2.79
DSS and the NDIA told the committee that engagement with people with disability and representative organisations on 'ways that Scheme delivery can be improved without compromising outcomes' is another 'critical element' of this work, and that Ministers have:
directed officials to continue to actively engage with representatives of people with disability on the projected growth in the scheme, and undertake qualitative analysis which might assist understanding how levels of supports through the scheme have changed over time for different kinds of participants.
2.80
Department officials confirmed that future published annual financial sustainability reports will provide a basis for monitoring future changes to projections over time. Mr Hoffman added that a review by the ministerial council of scheme costs is due by the end of 2023, and that this review is expected to examine, and update, forecasted costs.
NDIS Reserve fund
2.81
At a public hearing of this inquiry, Mr Peter Broadhead, Group Manager of NDIS Participants and Performance, DSS, told the committee that establishing a reserve fund for the scheme is a matter still ‘currently referred to the federal financial relations as part of a broader review of intergovernmental agreements’.
Transparency
2.82
DSS and the NDIA told the committee that the NDIA and other officials were working to assist people with disability and their representatives to better understand the information in the AFSR. Department officials also told the committee that the NDIA publishes a 'great deal' of data related to the scheme, pointing especially to the detailed information contained in its quarterly reports. In their supplementary submission, DSS and NDIA noted:
Public data sharing and open data allow people with disabilities, and their families and carers to benefit more from the Scheme. Transparency of these data will drive continuous improvement in participant outcomes and support a financially sustainable NDIS.
Data sharing has the potential to drive relevant policy development and enable programs to be properly assessed. It can promote innovation and contribute to economic growth, which supports the NDIS in improving social and employment results for people with disabilities, and their families.
2.83
The supplementary submission also identified the range of documents published by the NDIA which present financial data, modelling and forecasting information, and other analyses and reports on specific aspects of the scheme.
Benefits of the NDIS
2.84
In a public hearing on 1 February 2022, DSS described the NDIS as delivering significant benefits, and stated that the government is listening to stakeholders with respect to how to improve the scheme. DSS emphasised that financial sustainability is important to provide certainty to participants and their families but warned that the scheme is on a trajectory to significantly exceed previous estimates of both numbers of participants and the average cost of packages.
2.85
DSS and NDIA confirmed that the AFSR only examines expenditure of the scheme, and that this work does not make any cost-benefit analysis or consider the broader economic effects of the NDIS.
2.86
DSS considered that the relatively short period in which the scheme has been fully operational means that it still too soon to assess the impacts of early intervention approaches with respect to the lifetime insurance approach of the scheme. DSS told the committee that there is still an emphasis on early intervention within the scheme, particularly, but not exclusively, with respect to children, and that the scheme also seeks to invest in capacity building for participants.
2.87
The NDIA, however, pointed out that the Agency monitors performance against a range of outcomes in its outcomes framework, and pointed to progress on health outcomes. Under the outcomes framework the agency also tracks employment for participants and community engagement. Mr Hoffman told the committee that the Agency is 'well set up' to continue this monitoring work.