The end of cash for diagnosis? Now that would be a good thing

The Albanese government’s plan to divert children with mild developmental delays out of the NDIS marks the most significant reform to the scheme since its birth. It also confirms what critics have long warned: tying support to medical diagnoses has created a system where labels, rather than needs, determine access to help.

As Professor Frank Oberklaid of the Murdoch Children’s Research Institute observed, the NDIS has “not worked for children.” Some individuals with mild difficulties receive “buckets of money,” while others with genuine needs are overlooked.

Families, understandably desperate, are nudged toward obtaining a label — autism, ADHD, or something else — because only then do services flow. The result is a system that incentivises diagnosis, not need.

This ‘cash for diagnosis’ culture is not just a budget problem. It is a human one. Labels can alter children’s identities, sometimes for the rest of their lives. Children told they are ‘autistic’ or ‘disordered’ may come to inhabit that category, adjusting aspirations downward, and shifting responsibility for progress from themselves to the system.

Unlike a broken leg, which heals and is forgotten, psychiatric labels rarely vanish. Instead of fostering resilience and growth, the label can become a lifelong passport to dependency. That is why the government’s reforms must be understood not merely as cost-cutting but as child-saving: an attempt to free young people from the weight of unnecessary psychiatric branding.

Autism demonstrates how diagnostic categories, once expanded, rarely become narrower. In the 1960s, autism was thought to be extremely rare: fewer than one in 2,000 children. The diagnosis required symptoms to start before age three and usually involved significant impairment: children who could not speak, who rocked for hours, or who harmed themselves.

In 1980, the DSM introduced Asperger’s syndrome, a milder form. By 2013, Asperger’s and other categories were combined into a single Autism Spectrum Disorder (ASD). Suddenly, children with profound disabilities who cannot speak or care for themselves shared a label with bright but socially awkward teenagers.

The result was explosive growth of diagnosis. Between 2018 and 2022 alone, the number of Australians diagnosed with autism rose by 41.8 per cent. Around 30 in every 1,000 children now carry an ASD diagnosis — sixty times higher than in the 1960s.

Entire ecosystems of advocacy groups, specialist schools, and therapy providers have arisen to serve this population. Many do good work. Yet the broadening of criteria means that those most severely affected must compete for the same pool of resources as those with much milder difficulties.

Even Allen Frances, the psychiatrist who chaired the DSM-IV task force that helped broaden the autism definition to ASD, now regrets his role. What was once seen as endearing bashfulness, he says, has been turned into pathology. The ballooning of autism diagnoses has also fed conspiracy theories — about vaccines, food additives, or environmental toxins — that exploit public confusion.

Autism is not unique. ADHD, too, has undergone a dramatic diagnostic inflation. Once reserved for children who could barely sit still long enough to complete a classroom task, it is now applied to inattentive daydreamers, restless teenagers, and adults who misplace their keys.

Prescription rates for stimulant medication in Australia have soared. In both autism and ADHD, the consequence is the same: the label unlocks resources, and the line between illness and ordinary difference becomes blurred.

Against this background, the government’s new Thriving Kids proposal is more than a budget repair job. It is an attempt to replace diagnosis-driven rationing with function-based support. That shift should be welcomed — but only if it avoids the mistakes of the past.

Merely rebadging services without changing incentives will not work. If providers are still paid per therapy session, the treadmill of overservicing will continue. If families still perceive diagnosis as the golden ticket, the demand for labels will persist.

What’s needed is a true functional model: support tied to what a child can or cannot do, not to what a psychiatrist or paediatrician writes on a form. Schools, health clinics, and community services should provide foundational help without the need for a psychiatric certificate.

When children improve, supports should taper. When they fall behind, help should flow quickly — without the Kafkaesque wait for a diagnosis.

The Albanese government is right to be bold. But reform will succeed only if it rewires the incentives. Otherwise, we risk building a second scheme alongside the first, with the same flaws — just at greater cost.

The NDIS was born from compassion. Its survival depends on hard-headed realism: diagnosis should not be the price of entry, nor should labels become lifelong shackles. If Thriving Kids can break that cycle, it will not only save the scheme. It will save our children.

Emeritus Professor Steven Schwartz is the former Vice Chancellor of Macquarie University, a psychologist and a Senior Fellow at the Centre for Independent Studies.

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