Consultant Penny Knight argues the NDIS is on an unsustainable budget trajectory and the solution lies with the old WA model of greater local control.
There is no shortage of opinion on what is wrong with the National Disability Insurance Scheme, but very few solutions are being offered.
I’ve been working in areas associated with disability services for about a decade, since before the introduction of the NDIS, and am among those who forecast the problems we now have and tried to influence direction (to no avail).
What we saw were two fundamental flaws in the Productivity Commission’s initial design of the NDIS.
The first, and perhaps the one hardest to accept, is that Australians were being sold a fairy story.
A story in which everyone living with disability would get ‘reasonable and necessary’ supports regardless of the cost.
While we all genuinely want this to be true, in the real world, taxpayer resources are limited and government must allocate these across areas including health, education, defence and aged care, all of which also need reasonable and necessary support.
The budget for the NDIS is forecast to be $35.8 billion this year, rising to over $50 billion (or 1.93 per cent of GDP) by 2025-26.
However, the National Disability Insurance Agency routinely underestimates its growth.
The initial plan was to support about 550,000 people living with disability, but the NDIS’s 2023 Financial Sustainability Report is now saying there will be more than 1 million Australians in the NDIS at a cost of at least $90 billion (or 2.55 per cent of GDP) by 2032.
The second major problem with the NDIS is that its design ignored a golden rule of behavioural economics.
It is well-known that humans make different decisions about resource allocation depending on how much skin we have in the game.
This behaviour was noted by Nobel Prize winning economist Milton Friedman, but you don’t need to be an economist to understand it.
It’s that behaviour where the kids don’t turn off lights or put leftovers away until they pay their own bills.
It’s why we fly business class when someone else is paying for it.
It’s the theory of ‘someone else’s money’.
We also know that this behaviour is turbocharged in an environment like disability services.
When we see someone in hardship and we can spend someone else’s money to help, we will.
Why wouldn’t we?
Under the NDIS, the people who determine if someone qualifies for NDIS funding and how much they get are the clinicians (such as GPs, psychiatrists, allied health workers or a combination of these) who ‘diagnose’ the extent of someone’s disability.
When the government of the day, with bipartisan and community support, designed a social welfare system in which thousands of compassionate, professional clinicians are allocating government funding without accountability, they created a very powerful spending force.
When they put this inside an uncapped budget, there was no hope of controlling it.
The evidence supporting our predictions is here.
In September 2022, the NDIA reported that participant plan inflation was running at 20.5 per cent per annum.
Astonishingly, they also report that 9.9 per cent of all Australian boys in the five to seven years age group are now NDIS participants.
This is not what the NDIS was for.
More than 41 per cent of all NDIS participants are under the age of 14, which means the NDIS has also created a budget legacy that will last generations.
So how do we fix this?
First, we need to stop kidding ourselves and face the reality that the budget for disability services must be capped.
We should never have been told otherwise.
Nonetheless, this will be a very complex, difficult conversation and people living with disability, advocates and the public will rightfully be angry and disappointed.
Second, we need to bring the decisions about the needs, services and funding allocation into the same hands, so someone is responsible and accountable.
The NDIA tried to do this by centralising all decisions into its bureaucracy, but it didn’t work.
Administrators didn’t have the clinical credibility and relationship with participants, and, interestingly, they were not more prudent with funding.
So, the only other option is to go the other way and devolve budget responsibility into the hands of clinicians, or at least as close as we can get.
This is done by making clinicians part of a local community service and budget stewardship team.
This model is not new.
The Local Area Coordination (LAC) system that operated in Western Australia before the introduction of the NDIS is internationally recognised as an effective means of facilitating good services to people living with disabilities.
It was built to work withhuman nature, relying on those closest to community to make good decisions within reasonable limits.
It wasn’t perfect, but it’s the best model we have; and with national support from the NDIA it could be much better.
Among other benefits, local area coordinators can be great advocates and put pressure back on state and local governments, businesses and others to meet their day-to-day obligations to support people with disability in schools, work, health services and the community.
Much of this support was lost in the shift to the NDIS.
The first step in making this change will be to devolve disability budgets to states and territories.
Each state or territory government will then need to allocate funding to local areas or other categories (e.g. children under 14) so that we embed responsibility into communities.
By doing this, we also naturally bring the budget under control.
With the frankly frightening NDIS budget forecasts making front page headlines, it is now widely recognised that the NDIS delivery model is not sustainable.
We messed up, and kicking the can down the road with reviews and tweaking is not going to fix it.
People living with disability and other Australians need a system that works.
Given where we are now, that is going to require some seriously clever political leadership.
- Penny Knight is managing director of consulting firm BaxterLawley and a research fellow at the University of Western Australia.
