NDIS: The New Leviathan

In August, The Centre for Independent Studies broke the story that the National Disability Insurance Scheme would cost a lot more than what politicians and the media were saying it would.

Time and time again we heard (and are still hearing) that the NDIS would provide disability care and support to 411,000 people at an annual cost of $15 billion when it is fully operational in 2018–19.

These figures came from a comprehensive feasibility study by the Productivity Commission. However, there was a significant problem with the commission’s numbers that was not reflected in the public debate – they were 2009–10 figures and did not take into account nine years of price inflation, wage increases, and population growth to 2018–19.

The CIS requested under Freedom of Information laws a review of the commission’s NDIS costings conducted by the Australian Government Actuary that said the NDIS would not cover 411,000 people at a cost of $15 billion a year in 2018–19, but would in fact cover 441,000 people at a cost of about $22 billion a year when the scheme was fully operational in 2018–19.

However, those figures are for the first year alone. My report, released on 15 November 2012, shows that the NDIS will start big and get bigger rapidly, and grow to become the new leviathan of the Australian welfare state. In a nutshell, the NDIS is another Medicare.

A number of structural factors relating to increases in the pension age will drive growth in the NDIS-eligible population, and therefore NDIS expenditure, in the years after full implementation in 2018–19.

Combined with political pressure to expand NDIS eligibility to the 600,000 people aged 65 and older with a severe or profound disability and the 500,000 disability support pensioners who will not be eligible for NDIS-funded supports, there is serious potential for the size and scope of NDIS to grow beyond the government’s official estimates.

Looking at similar schemes in Australia and overseas, it is clear that once the NDIS is fully operational, government expenditure on the NDIS will grow rapidly at a rate of around 6% every year. By 2023–24, the NDIS eligible population will likely grow to about 500,000, and cost nearly $30 billion a year. The NDIS will need more than 8,000 public servants to administer the scheme.

Despite the size and cost of the NDIS, it is a worthwhile scheme that will improve the lives of hundreds of thousands of Australians with disability, their families and carers. However, given the bipartisan support for the NDIS, the government will need to make some tough decisions about how to pay for it.

Andrew Baker is a Policy Analyst at The Centre for Independent Studies and author of The New Leviathan: A National Disability Insurance Scheme, which was released on 15 November 2012.