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Costs and Financing for the NDIS

Costs and Financing for the NDIS. Professor of Health Statistics Director, National Centre for Classification in Health Co-Stream Leader, NDIS Centre for Disability Research and Policy. Richard Madden. Declaration of interests. Chair, House with No Steps

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Costs and Financing for the NDIS

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  1. Costs and Financing for the NDIS Professor of Health Statistics Director, National Centre for Classification in Health Co-Stream Leader, NDIS Centre for Disability Research and Policy Richard Madden

  2. Declaration of interests • Chair, House with No Steps • Board member, Royal Rehabilitation Centre Sydney • 1987-88 Head, Disability Services, Commonwealth Government • 1973-76 National Compensation Scheme • Fellow, Institute of Actuaries of Australia • I am a strong supporter of the NDIS and delighted with its commencement

  3. NDIS is essential and overdue • Rights of people with disabilities are paramount • Too many have no or inadequate support services • Families and carers need support • People will be able to purchase their own services • Disability services workers deserve proper recognition and pay • Disability services sector has to adapt

  4. Outline • The costs of the NDIS • Financing • Possible sources of increased cost • Possible responses to contain costs • Needs of service providers

  5. Costs of the NDIS: Productivity Commission • July 2011 • 410,000 expected participants • Annual net cost in 2018-19 (current dollars): • $5.0 – 8.0 billion, mid point $6.5 billion (P 779)

  6. Costs of the NDIS: Australian Government Actuary • February 2012 • Amendments to PC costings: • Reduction in offsets ($500 million) • Allowance for SaCS award (February 2012) • Annual net cost: $6.5 – 7.0 billion before SaCS award allowance • Annual net cost: $7.5 billion after allowing for SaCS award

  7. Costs of the NDIS: 2013 Commonwealth Budget • 460,000 expected participants • Full implementation by 1 July 2019 • No clear statement of full implementation net costs • $6.2 billion in new Commonwealth money in 2018-19 • A chart in Disability Care Australia May 2013 (part of the Budget papers) indicates new Commonwealth funding around $8 billion in 2019-20, the first full year of implementation

  8. Financing • 0.5% levy on taxable incomes (extension of Medicare levy) • will raise $3.3 billion in 2014-15 • to be paid into a Disability Fund (hypothecated) • States receive 25% of this, for use in funding the NDIS • States are to transfer current funding progressively to the Commonwealth as they vacate disability services • Commonwealth share of the levy ($15.9 billion) will more than fund additional NDIS costs up to 2018-19 ($14.3 billion): Macklin et al press release, 1 May 2013 • From 2020-21 onwards, Disability Care Australia May 2013 shows NDIS is fully funded by levy and savings measures

  9. Possible sources of increased cost • Bruce Bonyhady, Chairman, DisabilityCare Australia, 23 June 2013 • Ensure eligibility boundaries and reasonable and necessary supports are maintained and not widened • Complementary systems (health, education, aged care, employment, transport) must not shift costs to NDIS • Ensure a competitive market for disability service provision to contain service delivery costs University submission to Senate Committee on Community Affairs, February 2013 4. Uncertainty over individual funding: Assessments of entitlements is ‘bottom up’, with no priority setting mechanism; ‘reference packages’ of services are meant to contain cost, but mechanisms are unclear

  10. Some options to contain costs • Keep States financially involved • Casemix development • Reform injury compensation

  11. Keep States financially involved • Many of the complementary systems are State domains: health, education, housing • Therefore having States at least partially responsible for NDIS expenditure would reduce cost shifting incentives and permit more coordinated cross sector planning • People with complex needs require support from multiple sectors, so outcomes could be improved, as well as costs contained • Would also avoid the waste involved in dismantling State administration systems

  12. Casemix funding • Well accepted for hospital in-patients • National health reform process built around National Efficient Prices (NEPs) for each casemix group • Each casemix group is largely determined by the characteristics of the patient, notably health conditions • As experience builds on costs for various assessment levels, a similar process, based on assessment of functioning rather than health conditions, could be developed for NDIS determination of the amount of funding for reasonable and necessary support • Specific circumstances (environment of the client) could be handled through additional payments

  13. Reform injury compensation • Chapter 17 of the Productivity Commission systematically described the flaws of existing injury compensation systems, especially those based on fault: ‘a no fault system can deliver nearly 33% more services than the fault based system for the same price’ (P 847) • An NIIS would leave boundaries with the NDIS, and would not deal with the worst fault based systems such as medical indemnity • The NDIS has left state based compensation systems the first source of support for injured people: NDIS is a secondary scheme. • Possible reform steps: • (Ideal) Make NDIS the primary support scheme, with Cwlth/State financial adjustments • Work with States to eliminate fault based compensation, with savings dedicated to NDIS financing • Bar heads of damages for domains covered by NDIS

  14. Financial impacts of NDIS for service providers • Existing service providers are NGOs, with limited sources of funding • The sector has strongly advocated for the NDIS, and supports it • NDIS will require service providers to sell services, needing good billing systems and substantial working capital • This will put great pressure on many service providers • Could be exacerbated by new entrants to the sector

  15. Conclusion • NDIS is a wonderful social development for Australia: • the Centre for Independent Studies sees the NDIS as ‘another Medicare’ (high praise from such a source): CIS Policy Monograph 131, 2012 • There are opportunities for creative approaches and further reform of related systems • Active examination of financial progress, and continuing policy development and reform, are essential so that the NDIS can achieve its potential.

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