Budget Review 2021–22 Index
The Government has announced $13.2 billion in ‘additional
investment’ in the National Disability Insurance Scheme (NDIS or ‘the Scheme’).
The additional investment is not tied to any specific measure but is an upwards
revision of the projected costs of the NDIS, bringing the estimated cost to
$24.6 billion in 2020–21 (BP 1, p. 172). This follows comments by both the
former and current
Minister for the NDIS and the Prime
Minister concerning the fiscal sustainability of the Scheme.
provides support to people with disability and their families and carers. It is
jointly governed and funded by the Australian, and state and territory
governments. The main component of the NDIS is individualised packages of
support to eligible people with disability. To receive individualised support
under the NDIS, a person must meet disability requirements, and be aged under
65 years when they seek to join the Scheme. The NDIS was first introduced in a
number of trial sites in 2013, began to be fully rolled out in 2016, and has
been available in all states and territories since
According to the latest NDIS quarterly report, between
1 July and 31 December 2020 $10.9 billion in payments were made to
participants, supporting around 433,000 people (p. 75). The 2021–22
Portfolio Budget Statement (PBS) for Social Services has forecasted the
NDIS to reach $33.3 billion in total costs (of which participant supports will
account for about 96%) by 2024–25, over half of which will be provided for by
the Commonwealth (p. 172). Moreover, the National Disability Insurance Agency
(NDIA) flagged in the 2019
Annual Report that the Scheme will reach 532,000 participants, or 2.3% of
Australia’s estimated resident population, by June 2023 (p. 94).
The provision of supports is the primary function and cost
of the NDIS. Figure 1 presents projections for support costs compared to actual
payments since 2013–14. As Figure 1 shows, actual costs of supports have
consistently fallen below the forecasted support costs published in successive
Budgets. The only exception to date has been the 2019–20 Budget’s estimate for
support expenditure in 2019–20 when actual expenditure was slightly higher than
had been forecast.
Despite this historical underspend, Figure 1 shows that the
2021–22 Budget significantly increased the costs for participant supports over
the forward estimates.
Figure 1: Budget
estimated costs of reasonable and necessary care and support for participants
(2013–14 to 2024–25) and actual payments (2013–14 to 2019–20)
Source: Australian Government, Portfolio budget statements:
budget related paper no. 1.15a: Social Services Portfolio, various years;
NDIA, NDIS Quarterly
Report to disability ministers, 31 December 2020, p. 75.
Notably, projections for the years prior to 2020–21 have a wide
range between projected and actual expenditure reflecting the difficulty of
estimating the transition of existing state-supported participants to the NDIS,
exits from the early intervention pathway, and utilisation of plans. The range
of estimates appear to narrow around 2020–21 then widen for subsequent years.
The projected costs from the 2021–22 Budget appear to follow a greater growth
trajectory than earlier years, which flattened after 2020–21. The difference in
projections for 2020–21 and beyond show a continual revision upwards, however
this Budget’s forecasts are noticeably greater for comparable years than
earlier projections. Figure 2 presents an overlay of Budget estimates for
comparable years with cost projections from the 2021–22 Budget:
Figure 2: Budget
Source: Australian Government, ‘Expenses and net capital
investment’, Budget Strategy and Outlook: Budget paper no. 1, various
years, Table ‘Trends in the major components of assistance to people with
disabilities sub-function expenses’.
Note: **Includes both Commonwealth and State contributions to
the cost of the NDIS delivered through the NDIA, which is a Commonwealth agency
in the General Government Sector. Also includes Transition Programme funding.
***Includes both Commonwealth and state contributions to the
cost of the NDIS delivered through the NDIA, which is a Commonwealth agency in
the General Government Sector, and the cost of the NDIS Transition program
delivered by the Department of Social Services.
The increasing cost of the Scheme over the last few years has
led members of the Government and the media
to query the fiscal sustainability of the Scheme over the long term. Often,
these concerns are connected to cost projections coming in higher than the
original forecasts from the Productivity Commission’s 2011 report Disability
Care and Support for costs and participant numbers. The 2021–22
Budget cites ‘increased participant numbers and higher than expected
average participant costs’ of the Scheme for the revised projections but does
not expand on this (p. 83).
However, the NDIA revaluates the Scheme’s costs every year
in its annual Financial Sustainability Report. These reports are
provided to the NDIA Board and are not made publicly available, but a short
summary of their findings is released in the annual report. The Productivity
Commission’s 2017 Report National
Disability Insurance Scheme (NDIS) Costs provided updated projections
for the Scheme using trial data from the early years of the Scheme.
Care and Support report estimated that a fully rolled-out NDIS would
cost about $13.6 billion in gross operating costs (or about $6.5 billion in net
costs once offsets from existing disability services expenditures were
considered) and would consist of about 411,250 participants by 2018–19 (pp.
776–7). The PC acknowledged considerable uncertainty about these estimates as
the data available at the time was derived from multiple sources which varied
considerably in their nature and quality (pp. 749–86). Furthermore, the PC’s
model did not include persons over 65 years of age.
In 2014, the NDIA’s
annual report presented the summary findings of the first Annual
Financial Sustainability Report (FSR) of the NDIS. The 2013–14 Annual
Report improved upon the PC’s original modelling through the inclusion of data
gathered from the Scheme’s trial sites. The NDIA’s model estimated that the
460,000 people would be eligible for the NDIS, and package costs for
participants at full Scheme in 2019–20 would reach $21.8 billion. The total
operating cost of the Scheme was projected at $22.7 billion by 2019–20.
Although substantially larger than the PC’s estimates, the
NDIA considered its estimates in line with the PC’s original work once
inflation and population growth were considered, and people aged over 65 years
were excluded (p. 109).
annual reports were largely consistent with the 2013–14 report, with all
finding that the estimated cost of participant plans of $22 billion remained
‘the best estimate of the longer-term cost of a well-managed NDIS’. The Scheme
expanded significantly over these years, almost tripling in size between 2015–16
and 2016–17 (NDIA 2016–17, p. 154), and in keeping with the roll-out schedule,
would expand rapidly over the next three years.
As per the Heads
of Agreement between the Commonwealth and state and territory governments,
the PC reviewed costs of the Scheme in 2017. The PC’s National
Disability Insurance Scheme (NDIS) Costs report examined the operation
of the Scheme to date, the sustainability of the Scheme’s costs and provided
recommendations to inform the final design of the full Scheme.
The PC found that the NDIS costs were broadly on track with
long-term modelling, however:
In terms of reliable cost data, it is still very early days
in the transition to full scheme. And while the transition experience should
inform estimates of full scheme costs, the NDIA has decided that, at this early
stage, the data have too many limitations to update the prevalence and package
cost assumptions. (p. 15)
With these limitations in mind, the PC considered the
projection of full Scheme costs at $22 billion in 2019–20, reaching about
475,000 participants as broadly consistent with the PC’s 2011 report. Using
NDIA modelling estimates, the PC presented estimated operating costs of the
NDIS for 2024–25 as $30.6 billion, rising to about $41 billion in 2029–30 (p.
100). Commenting on the sustainability of the Scheme, the PC noted that:
While the NDIS is sometimes described as an ‘uncapped
scheme’, the ultimate cap — and test of financial sustainability — is
taxpayers’ continuing willingness to pay for it. Unlike other insurance schemes
that rely on premiums to fund costs, the NDIS will only be funded as long as
taxpayers consider it is a good use of taxes. (p. 82)
Subsequent NDIA annual reports appear to have updated their
projections according to the PC’s recommendations. The 2017–18
Annual Report’s projections are in line with the PC’s estimates at full Scheme.
Annual Report presents new estimated participant figures for 2023, showing
a rise of 460,000 estimated to be in the Scheme by July 2020 to 500,000 by July
2023. The 2018–19 report estimates that Scheme costs are expected to be about
0.9% of GDP by 2019–20 and 1.2% of GDP in 2022–23.
The latest annual report covers the 2019–20 financial year
and appears to revise both expected participant plan costs and participant
numbers upwards over the short term. The 2019–20
Annual Report projects the Scheme to reach 530,000 by July 2023, with Scheme
costs rising to the equivalent of about 1.4% of GDP. This increase appears to
inform the most recent Budget estimates and seems to be part of the reason for
wider discussion concerning the growth of Scheme costs, or ‘the financial
sustainability of the scheme’. As the NDIA
has pointed out, the current estimates for participant plan costs come in
higher than those estimated by the PC in 2017. The 2019–20
Annual Report identifies the larger number of participants in the scheme
and higher costs of participant plans as drivers of this (p. 95). However, the
report does note that the Scheme’s costs for 2021–22 are in line with the PC’s
2017 estimates, once certain costs not included in the PC’s estimate are
considered (p. 40).
Why have estimated
future costs increased
Since the 2013–14 Annual Report, the NDIA has identified
‘cost pressures’ within the Scheme and associated ‘management responses’ to
address sustainability pressures in each report. The cost drivers don’t
significantly change year to year, with ageing and inflation driving up the
cost of participant budgets. Average costs per plan have steadily grown since
the trialling phase of the Scheme and have grown rapidly for participants in
supported independent living arrangements.
However, the information available in the NDIA’s annual
reports and the latest Budget do not provide a clear picture for why the NDIA’s
latest projections have risen so substantially. The cost pressures identified
do not differ significantly from previous years’ reporting, and in those previous
years’ forecasts for the cost of the Scheme were not revised up as substantially
as they have been in the 2021–22 Budget.
Although this Budget did not present any new measures to
address cost pressures within the NDIS, the Government pursued some options in
addressing the cost of the NDIS
The financing of the NDIS has been a persistent concern
since the early days of the roll-out. The original Productivity Commission
report considered several financing arrangements, ultimately recommending that
the Australian Government should be the single funder of the NDIS. The PC also
recommended that the Australian Government direct payments from consolidated
revenue into a specific-purpose fund using a legislated formula that provided
stable revenue to meet the needs of the NDIS. The Scheme would be funded by
‘whatever was the most efficient tax financing arrangement at the time’ (p. 34)
The implemented NDIS uses a pooled approach, with funding
contributed by Australian and state and territory governments. The Government
has proposed a few means to allocate funding and to finance the Scheme:
- an increase of the Medicare Levy to 2.5%, and
the establishment of a NDIS Savings Fund in 2016, which
was intended to meet the future demands of the Scheme and would
be funded by savings from within the Social Services portfolio.
The Savings Fund was subsequently dropped in 2019–20 as ‘the
Government’s positive budget position means that future funding for the NDIS
[had] been secured’ (‘Part
1: Revenue Measures’, Budget paper no. 2: Budget measures 2019–20,
p. 8), with the enabling Bill
lapsing in 2019. In contrast, the Medicare Levy was increased to 2% in July
2014 with the second increase to 2.5% failing
to pass the Parliament.
The NDIA has consistently flagged cost pressure concerns
throughout the roll-out of the NDIS. It has noted that the Scheme has come in
either at cost or lower every year, however this is due to the masking of costs
caused by low plan utilisation rates coupled with high cost packages. As the
national roll-out is now complete, plan utilisation will likely increase as
existing participants improve their plan usage (the longer a participant is in
the Scheme, the more they tend to use their plan) (NDIA, Annual Report 2019–20,
It is unclear why the revision in
the latest Budget is as large as it is. The change in projected costs is
considerably larger than previous years, and the explanation provided does not
provide a clear reason why. Stakeholder
and representatives from the state
and territories have argued that the Scheme is largely tracking in line
It is also worth considering the benefits of the NDIS. As
the PC report notes in the 2017 report:
Early indications are that most NDIS participants are
accessing more supports under the NDIS than under the previous disability
system, including more hours of support, a wider range of support and greater
access to equipment. (p. 133)
As the PC estimated in 2011 the private benefits for people
with disabilities, fiscal offsets and economic efficiency gains of the Scheme
‘would significantly exceed the additional costs of the scheme’ (p. 976).