A once healthy plan to deliver more with less now looks doomed

Predictions the National Disability Insurance Scheme would become a new leviathan — a massive, unfunded entitlement program to rival Medicare — are proving true.

The states are shifting the cost of caring for the mentally ill onto the Commonwealth by rolling mental health program funding into the NDIS, raising new concerns about the sustainability of the scheme, which will now cost $22 billion a year when fully rolled out in 2020.

This is $7 billion more than $15 billion annual cost estimated by the Productivity Commission in 2012 and the cost blow out is largely due to the decision to expand the scope of the NDIS  by including mental (‘psychosocial’) and educational  (‘learning and social interaction’) disabilities.

Like Medicare, NDIS will impose large financial burdens on future generations.

To control the cost and promote the sustainability of the NDIS, policy makers must set the right priorities and must continue to reform the social services sector, consistent with the original aim of the NDIS, which is to ensure that Australians with the most profound disabilities receive appropriate levels of care and support in an affordable way.

Needs-based distinctions between the most severe and less severe disability sufferers must be firmly drawn to limit eligibility of the NDIS, or else funding will need to be spread so thinly on the ground so as to limit the level of services received by those most in need of assistance.

Policymakers also need to remember that the purpose of the NDIS is not to simply create a ‘magic pudding’ by securing federal funding for existing disability services. The real objective is to deliver more and better services out of scarce funding by using choice and competition to both improve the care and support received by consumers and achieve better value for taxpayer’s dollars.

Under the NDIS, the disabled will for first time be able to access individualised funding budgets, and be free to purchase the care and support services they require based on personal choice from the provider they prefer.

The new consumer-driven funding system is designed address the systemic problems in state-based disability sectors that have long delivered inadequate, inflexible, high cost, and poor quality services.

Important lessons for the NDIS can be learned from the Consumer-Directed Care’ (CDC) aged reforms, which have implemented a virtually identical funding model.

Since February this year, aged care recipients are also receiving individualised funding and have been empowered with the freedom to choose the type, mix, and provider of home-based care and support services they want.

Consumer-directed care has replaced the long-established and highly-regimented system of block funding of ‘approved providers’ — mainly faith-based charitable organisations — which forced consumers to accept the inflexible and inefficient kind of ‘one-size-fits-all’ care and support services.

Traditional home care services also incur large administrative overheads that absorb around 30–50% of all funding — raising the overall public cost of care, and limiting the amount of frontline services delivered from available funding.

Thankfully, the CDC reforms have allowed new and technologically-innovative players to enter the market, which are not burdened with traditional provider overheads and rigidities. The new peer-to peer (P2P) online platforms can directly connect consumers with care workers and can potentially double the amount of personalised care and support consumers receive: delivering 20-plus hours care per week — 8 hours more than traditional providers supply from the same care funding ‘package’.

The CDC reforms — like the NDIS — can potentially deliver more efficient and effective aged care services that will also improve the bottom line for government – but only if other regulatory changes occur to fully enable real consumer choice and innovative service delivery.

The necessary reforms include establishing a minimum standards framework for home care, and ensuring excessive regulation doesn’t restrict choice — and is also not used by traditional providers as an excuse to prevent consumers switching to alternative providers.

Mandatory qualification requirements must also be revisited to make it easier for care workers without industry experience to seek employment in the sector. And the way employment law applies to independent contractor care workers need to be clarified to further encourage the growth of online marketplaces.

The reforms needed in aged care are also highly relevant to the future of the NDIS.

Traditional providers, whose business model will be disrupted by the introduction of consumer choice and the emergence of the new economy in disability services, are already calling for strict national quality and training standards to be imposed – and for more funding to be poured into the system to meet the extra cost of ‘excessive’ regulation.

Policymakers must not give in to vested interests undermining the reforming purpose of the NDIS.

In both aged care and disability services, policymakers must focus instead on implementing the reforms that are needed to foster greater choice and competition – reforms that can help both state and federal governments with their tight budgetary situations by delivering more services with minimal additional cost.

Dr Jeremy Sammut is a Senior Research Fellow and Director of the Healthcare Innovations Program at the Centre for Independent Studies, and author of the report, Real Choice for Ageing Australians: Achieving the Benefits of the Consumer-Directed Aged Reforms in the New Economy.