National Disability Insurance Scheme

Budget Review 2017–18 Index

Luke Buckmaster and Anna Dunkley

‘Fully funding’ the NDIS

Arrangements for funding the National Disability Insurance Scheme (NDIS) are complex and contentious.[1] The Abbott and Turnbull Coalition governments have both repeatedly asserted that the previous Labor Government did not provide sufficient funding to fully implement the scheme, while Labor says that it ‘set out a budgeted plan for the NDIS’ in the 2013–14 Budget.[2]

In the 2017–18 Budget the Government has announced that it will address the shortfall it has identified in NDIS funding by using 20 per cent of the funds raised through increasing the Medicare levy from 2.0 per cent to 2.5 per cent from 1 July 2019.[3] According to the budget papers:

The Government will use all revenue generated by the Medicare levy to support the NDIS and to guarantee Medicare. In particular, the Government will credit $9.1 billion over the forward estimates period to the NDIS Savings Fund Special Account when it is established.[4]

Increasing the Medicare levy will require legislation. Legislation to introduce the NDIS Savings Fund Special Account is currently at the second reading stage in the Senate.[5]

The importance of a stable funding source

Funding for disability has long been the subject of debates about cost and a matter of blame shifting between the Commonwealth and the states and territories. Guaranteed future funding for disability services was part of the rationale for the NDIS. In its report recommending the introduction of the NDIS, the Productivity Commission suggested that, in order to provide a stable revenue stream, the Australian Government should finance the entire costs of the scheme from general revenue, or a levy ‘hypothecated to the full revenue needs of the NDIS’.[6]

Current funding arrangements

Funding for the NDIS differs from the approach suggested by the Productivity Commission. It is based on agreements between the Australian and state and territory governments, and comes from a combination of sources.[7]

First, existing money spent by the Australian and state and territory governments on disability services is being redirected to the NDIS.

Second, in July 2014 the Medicare levy was increased (from 1.5 per cent to 2.0 per cent of taxable income),[8] with the revenue directed to a special fund—the DisabilityCare Australia Fund—for the purpose of reimbursing governments for NDIS expenditure.[9] However, the 2014 increase in the Medicare levy was not designed to meet the full revenue needs of the scheme (just as the levy only partially covers the annual cost of Medicare).

Finally, any NDIS funding not offset by the above sources must come from general budget revenue or borrowings.

Funding from 2019

The cost of the NDIS will increase substantially over the next few years as it is progressively introduced: from around $4 billion in 2016–17 to $21 billion in 2019–20.[10] It is important to note, however, that the Australian Government will only be responsible for around half of the annual cost of the scheme ($10.8 billion in 2019–20) with the states and territories responsible for the remainder.[11]

According to the Government, funding arising from the previous increase to the Medicare levy and from redirected disability funding is ‘not sufficient to cover the Commonwealth’s NDIS contribution in full scheme, leading to a $3.8 billion shortfall in 2019–20’.[12] As can be seen in the chart below, the Government has indicated that funding from the proposed Medicare levy increase from July 2019 will cover the gap it has identified between the sources of funding identified above and the remaining amount it is obliged to provide under agreements with the states and territories.

Chart 1: Commonwealth’s NDIS contribution and funding sources

With the funds directed to the NDIS Savings Fund, the NDIS is fully funded over the medium term.

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2017–18, p. 3-9.[13]

As noted above, around 20 per cent of revenue raised by the increased Medicare levy is to be credited to the proposed NDIS Savings Fund.[14] It is not clear that this fund would need to be established for the Government to provide funding to the NDIS. Further, given revenue from the Medicare levy is not intended to meet the full cost of the NDIS, it may not provide the stable revenue stream envisaged by the Productivity Commission when it recommended the introduction of the scheme.

National Disability Insurance Scheme—finalisation of transition arrangements

This budget measure provides initial funding for the NDIS in Western Australia (WA), and for transitioning some WA aged and disability care services to programs administered by the Australian Government.[15]

On 1 February 2017 the Commonwealth and WA governments announced an agreement for a ‘nationally consistent’ but state-operated NDIS to be introduced in WA from July 2017.[16] The NDIS in WA is intended to be consistent with the scheme elsewhere in Australia, but delivered under state legislation.[17] While many WA disability service organisations welcomed the new model, concerns have been expressed regarding the costs to WA.[18] Reportedly, WA ‘Disability Services Minister Stephen Dawson is reviewing the Barnett government’s decision to operate a State-run version of the NDIS’ and is expected to make a decision later in May 2017 about whether to proceed with the model.[19]

This budget measure allocates $868.2 million over three years from 2017–18 to support the transition to the NDIS in WA via the National Partnership on the Transition to NDIS in Western Australia.[20] The 2017–18 Budget does not include details of funding for the NDIS after 2021, as negotiations are ongoing.[21]

This budget measure also allocates $754 million over five years from 2016–17 to replace some
WA-based services with those provided by the Australian Government.[22] From 1 July 2018, WA Home and Community Care services will be provided by the Commonwealth Home Support Programme for people aged 65 and older, and from 1 July 2019 the WA Specialist Disability Services will be delivered under the Commonwealth Continuity of Support Program.[23] WA aged care service providers have been largely positive about the change to the Commonwealth Home Support Programme.[24] These changes are ‘consistent with arrangements across the other states and territories’ and the 2011 National Health Reform Agreement.[25]

These measures are unlikely to require legislation.

National Disability Insurance Scheme Quality and Safeguards Commission—establishment

During the transition to the full NDIS, states and territories are maintaining separate arrangements for ensuring that services to NDIS participants are safe and of sufficient quality.[26] However, governments have committed to creating a ‘nationally consistent and responsive quality and safeguarding system that supports participant choice and control in the NDIS market’.[27] The NDIS Quality and Safeguarding Framework was released in February 2017, and is expected to be developed further through additional consultation.[28] Building on this, the 2017–18 Budget provides $209 million over four years from 2017–18 to establish a Quality and Safeguards Commission for the NDIS.[29] This funding is to be directed to the new Commission and a range of other Commonwealth agencies, including the Department of Human Services (which will develop an information and communication (ICT) system for the Commission).[30]

From 1 January 2018, the Commission will begin to replace the existing arrangements as each jurisdiction implements the full NDIS, to ‘deliver a nationally consistent quality and safeguarding system for the first time’.[31] The Commission will be responsible for education and capacity building, as well as exercising ‘preventative and corrective powers’, and will:

-register NDIS providers and oversee provider quality

-respond to complaints and manage reportable incidents such as the abuse or neglect of a participant

-provide leadership to reduce and eliminate restrictive practices, such as the use of physical restraints.[32]

Associate Professor Helen Dickinson of the University of New South Wales has said that ‘while such an agency will be welcomed by many, the devil will be in the detail as to whether it is possible to deliver this in practice’.[33] This view was echoed by Disabled People’s Organisations Australia, which stated:

Although we need to see more of the detail, we also welcome the establishment of the NDIS Quality and Safeguarding Commission, which will go a long way to protecting NDIS eligible people with disability from violence and abuse, and providing quality NDIS services.[34]

The establishment of the Commission is likely to require legislation. The development of an ICT system for the Commission will not require legislation.[35]

Boosting the local care workforce

Australia’s ageing population and the implementation of the NDIS is expected to increase the demand for workers in the aged and disability care sectors.[36] According to the Government, the ‘disability workforce is expected to more than double as the NDIS is introduced, from around 73,000 full-time equivalent workers in 2013 before the NDIS trials began, to around 162,000 full-time equivalent workers when the scheme is fully implemented in 2019-20’.[37]

The NDIS Integrated Market, Sector and Workforce Strategy notes the ‘particular challenges of rural and remote locations and other thin market segments will require enhanced local cross-sectoral coordination’.[38] This budget measure directs $33 million to increase the supply of care workers in rural, regional and outer suburban areas, to meet workforce demand in the disability and aged care sectors.[39] This funding is to be drawn from within the existing resources of the Department of Health and the Department of Social Services.[40] It is unlikely this budget measure will require legislation.

[1]. L Buckmaster, The National Disability Insurance Scheme: a quick guide, Research paper series, 2016–17, Parliamentary Library, Canberra, 2017. Much of the section in this brief dealing with the funding of the National Disability Insurance Scheme is taken from this research paper.

[2]. C Porter, ‘Second reading speech: National Disability Insurance Scheme Savings Fund Special Account Bill 2016’, House of Representatives, Debates, 16 March 2016, p. 3247; J Macklin (Shadow Minister for Disability Reform and Shadow Minister for Families and Payments) and T Burke (Shadow Minister for Finance), Pickpocket Porter steals NDIS money, joint media release, 9 April 2016.

[3]. Australian Government, Budget strategy and outlook: budget paper no. 1: 2017–18, pp. 3-8 to 3-10. See also: Australian Government, Budget measures: budget paper no. 2: 2017–18, pp. 24–25.

[4]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 25. See the 'Medicare' brief elsewhere in the Budget Review for further discussion of the ‘Guaranteeing Medicare’ measure.

[5]. Parliament of Australia, ‘National Disability Insurance Scheme Savings Fund Special Account Bill 2016 homepage’, Parliament website.

[6]. Productivity Commission, Disability care and support—volume 1, Report, 54, Canberra, 2011, p. 85.

[7]. NDIS, ‘Intergovernmental agreements’, NDIS website.

[8]. J Gillard (Prime Minister) and W Swan (Treasurer), Medicare Levy increase to fund DisabilityCare Australia passes the Parliament, media release, 16 May 2013.

[9]. Ibid.

[10]. Australian Government, Budget strategy and outlook: budget paper no. 1: 2016–17, p. 3-14; Australian Government, Budget strategy and outlook: budget paper no. 1: 2017–18, p. 3-9.

[11]. Budget strategy and outlook: budget paper no. 1: 2017–18, op. cit., p. 3-9.

[12]. Ibid.

[13]. According to the note in budget paper no. 1: ‘This medium-term projection is based on current parameters, including the number of NDIS participants and package costs. The NDIS Savings Fund includes one-fifth of the Medicare levy from 1 July 2019, underspends and realised saves redirected to the NDIS Savings Fund, and uncommitted funds from the Building Australia Fund and Education Investment Fund’. Ibid., p. 3-10.

[14] The reasons for establishing the proposed NDIS Savings Fund rather than using the existing Disability Care Australia Fund were discussed in the Senate Community Affairs Committee, Report on the Provisions of the National Disability Insurance Scheme Savings Fund Special Account Bill 2016, pp. 9-11.

[15]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 153.

[16]. C Porter (Minister for Social Services), C Barnett (Premier of Western Australia) and D Faragher (WA Minister for Planning, Disability Services), Governments sign bilateral agreement on local delivery of NDIS in WA [and] Western Australia (WA) roll out schedule, joint media release, 1 February 2017.

[17]. Ibid.

[18]. NDS, NDS welcomes signing of WA NDIS Bilateral Agreement, media release, 1 February 2017; P Wearne, ‘Call to abandon disability deal’, The West Australian, 28 February 2017.

[19]. P Wearne, ‘WA wary of standalone deal on NDIS’, The West Australian, 5 May 2017, p. 12.

[20]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 153.

[21]. Ibid.

[22]. Ibid.

[23]. Ibid.; Department of Health (DoH), ‘Commonwealth Home Support Programme’ and ‘Commonwealth Continuity of Support Programme’, DoH website, April 2017.

[24]. See L Belardi, ‘Western Australian HACC to join Commonwealth Support Program from July 2018’, Community Care Review, 16 February 2017.

[25]. K Wyatt (Minister for Aged Care), Changes in WA home support aged care services, media release, 1 February 2017.

[26]. Disability Reform Council (DRC), NDIS Quality and Safeguarding Framework, Department of Social Services (DSS), December 2016.

[27]. Ibid.

[28]. Ibid.; S Easton, ‘The NDIS quality and safeguarding framework has finally emerged from the complex deliberations between Australia’s nine governments’, The Mandarin, 10 February 2017, p. 3.

[29]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 154.

[30]. Ibid.; Department of Human Services (DHS), ‘NDIS Quality and Safeguards Commission—establishment’, DHS website.

[31]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 154; C Porter (Minister for Social Services), Z Seselja (Assistant Minister for Social Services) and J Prentice (Assistant Minister for Social Services and Disability Services), Budget 2017: guaranteeing the NDIS and providing stronger support for people with disability, joint media release, 9 May 2017, p. 2.

[32]. Guaranteeing the NDIS and providing stronger support for people with disability, op. cit., p. 1.

[33]. H Dickinson, ‘NDIS’, ‘Budget 2017 sees Medicare rebate freeze slowly lifted and more funding for the NDIS: experts respond’, The Conversation, 9 May 2017, p. 2.

[34]. Disabled People’s Organisations Australia, Great NDIS and job support wins, but harsh welfare measures for people with disability, media release, 9 May 2017.

[35]. ‘NDIS Quality and Safeguards Commission—establishment’, op. cit.

[36]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 145.

[37]. Guaranteeing the NDIS and providing stronger support for people with disability, op. cit., p. 1.

[38]. Senior Officials Working Group for the Disability Reform Council, NDIS integrated market, sector and workforce strategy, NDIS, June 2015, p. 19.

[39]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 145; Guaranteeing the NDIS and providing stronger support for people with disability, op. cit., p. 1.

[40]. Budget measures: budget paper no. 2: 2017–18, op. cit., p. 145.

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