Updated 8 May 2019
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Buckmaster and Shannon Clark
What is the National
Disability Insurance Scheme?
The National Disability
Insurance Scheme (NDIS) provides support to people with disability, their
families and carers. It is jointly governed and funded by the Australian,
and state and territory governments. The NDIS commenced on 1 July 2013,
beginning with a trial phase known as the NDIS
Launch. Transition to the full scheme began in July 2016 as
the NDIS started being progressively introduced across Australia. The
NDIS is now
available in all states and territories, with the remaining areas of
Western Australia progressively expected to join by July 2020.
The NDIS is a new
model of funding and delivering supports
for people with disability. It takes an insurance-based approach and moves from
the previous system of block funding to a fee-for-service, market-based
approach (discussed further below). It is based on the premise that people with
disability each have different support needs and should be able to exercise
choice about the supports they need.
The main component of the NDIS is individualised packages of
support to eligible people with disability. When the NDIS is fully implemented,
it is expected that around 475,000
Australians will receive individualised supports.
The NDIS also has a broader role in helping all people with
disability—approximately 4.3 million
- access mainstream services, such as health,
housing and education
- access community services, such as sports clubs
and libraries and
- maintain informal supports, such as family and
The NDIS is not means tested. And, like many other Australian
Government social policy programs—such as Medicare, the Pharmaceutical Benefits
Scheme (PBS) and income support payments—the NDIS is an uncapped
Objectives and principles of the National
Disability Insurance Scheme
The NDIS was established under the National
Disability Insurance Scheme Act 2013 (NDIS Act) (Cth). The NDIS Rules are
legislative instruments made under the NDIS Act which set out the
operational details of the NDIS.
The NDIS Act also established the National Disability Insurance Agency
(NDIA), the independent statutory agency responsible for administering the
Objectives of the scheme outlined in the NDIS Act
- supporting the independence and social and economic participation
of people with disability
- providing reasonable
and necessary supports, including early intervention supports, for participants
- enabling people with disability to exercise choice and control in
the pursuit of their goals and the planning and delivery of their supports
- facilitating the development of a nationally consistent approach
to accessing, planning and funding of supports for people with disability and
- promoting the provision of high quality and innovative supports
to people with disability.
The NDIS is
underpinned by an ‘insurance-based approach, informed by actuarial analysis, to
the provision and funding of supports for people with disability’ (explained in
more detail below). The NDIS Act also specifies that, in implementing
the NDIS, regard must be had to ensuring its financial stability.
What is the National Disability
Insurance Scheme replacing?
The NDIS is a major reform to disability support in
Australia. It is the first national approach to the provision of
disability supports and largely replaces state and territory-based disability
care and support systems provided under the National Disability Agreement (NDA). Introduced
by the Council of Australian Governments (COAG) in 2009, the NDA was the fourth
iteration of the Commonwealth State Territory Disability Agreement. These
agreements have provided the national framework for disability support services
in Australia since 1991.
The NDA set out the roles and responsibilities
for each level of government and agreed objectives and outcomes for people with
disability. Under the NDA, the Australian Government has responsibility for providing
employment services for people with disability and funding for states and
territories to assist with meeting the objectives of the NDA. State and territory governments are responsible for specialist disability
services, such as accommodation support, respite care, community support,
community access, and advocacy and information for people with disability. Responsibilities
under the NDA remain until the NDIS is fully rolled out.
In 2011, the Productivity Commission recommended
that Australia replace the existing system with a unified national scheme to
fund long-term, high-quality care and support for all Australians who experience
significant disability (to be known as the NDIS). It described the existing
system as ‘underfunded, unfair, fragmented, and inefficient’, arguing that it
gave people with a disability ‘little choice and no certainty of access to
The dominant funding model in the previous disability
support system was block funding, whereby governments fund service providers
directly with lump sum payments. The Productivity Commission recommended a
shift from block funding to ‘individualised’ or ‘self-directed’ funding,
whereby people with disability have an individual budget they can spend on
goods and services. The intention of self-directed funding is to give people
with disability decision-making power as consumers and control of their budgets.
Following the release of the Productivity Commission’s report,
the Gillard Government began working with the states and territories to
establish the NDIS.
What is meant by ‘insurance
What is an insurance-based approach and how is it intended
to differ from previous arrangements?
to Bruce Bonyhady, former Chairman of the NDIA, the insurance approach can
be contrasted with the ‘welfare approach’ to disability services, according to
Governments plan for expenditures over a 12-month period to—at
most—a five-year time frame. As a consequence, the funds available for
disability can change—depending on the economy, tax revenues and the
requirements of other portfolios.
In contrast, under an insurance approach, ‘expenditure is
factored in over the life of an individual—and scheme sustainability is
measured by calculating the total future costs of all those who are insured’.
This approach, argues Bonyhady, creates an incentive to make
short-term investments in participants aimed at increasing their independence
and participation in the community and the workforce in the hope of reducing
According to Bonyhady, a focus on reducing long-term costs
also means that insurance schemes have an incentive to monitor gaps between
forecasts and outcomes, as well as the benefits of the scheme for participants.
Who may access individualised
To be eligible to receive individualised supports under the
NDIS, a person must meet certain access
requirements. These include that the person must:
Requests for access to
NDIS individualised supports are made to the NDIA. Those found eligible are known
as NDIS ‘participants’.
What individualised supports are
Supports may be funded in areas such as education,
employment, social participation, independence, living arrangements and health
and wellbeing. They may
include funding for:
- daily personal activities
- transport to enable participation in community, social, economic
and daily life activities
- workplace training to allow a participant to successfully get or
keep employment in the open or supported labour market
- therapeutic supports including behaviour support
- help with household tasks to allow the participant to maintain
their home environment
- help by skilled personnel in arranging aids or equipment
assessment, set-up and training
- home modification design and construction
- mobility equipment and
- vehicle modifications.
NDIS participants have a planning conversation with a
representative of the NDIA—an Early Childhood Early Intervention Coordinator,
Local Area Coordinator, or NDIA planner—to identify a set of supports agreed as
and necessary’ to meet their goals. These are then included in the
participant’s ‘NDIS plan’. Under the objects and principles of the NDIS Act,
participants are entitled
to exercise ‘choice and control in the pursuit of their goals and the planning
and delivery of their supports’. Funds provided under an NDIS plan may be
managed by the participant, the NDIA, a registered plan management provider or
a nominee of the participant. Supports are provided by registered providers in what the
NDIA envisages will be a competitive, ‘self-sustaining’ market.
How much will the National
Disability Insurance Scheme cost?
The cost of the NDIS will increase
substantially as it is progressively introduced, before stabilising. In 2019–20,
it is estimated
that the annual cost will be $17.5 billion (a reduction from the previous
estimate of $20.7 billion, largely as a result of the ‘slower than expected
transition of participants into the NDIS’).
By 2022–23, the NDIS is expected to cost $24.8 billion. From
2019–20 to 2022–23, NDIS expenses are expected to total $88.1 billion. It is
important to note, however, that the Australian Government will only be
responsible for just over half of the total estimated costs ($45.7 billion),
with state and territory governments contributing the remaining funding.
The NDIS represents a substantial new government program. In
2019–20, the NDIS is estimated
to be the seventh largest program by expenses. At full scheme, the majority
of NDIS costs will be for individualised supports with the NDIA aiming
to keep operating costs at approximately 7.0 per cent of the costs of the
NDIS. However, the Productivity Commission has argued that while the
NDIS will be a cost to government it will not be a cost to the economy. In its
recommending the introduction of the NDIS, it suggested that the benefits of
the NDIS would outweigh the costs and add almost 1.0 per cent to
Australia’s gross domestic product.
In October 2017, the Productivity Commission released the final
report of its review into NDIS costs.
The Productivity Commission noted that the costs of the NDIS were broadly on
track with long-term modelling; however, this was partly due to not all
committed supports being utilised. The report estimated that the planned
timetable for participant intake would not be met by 2019–20: ‘the participant
intake will not match the estimates in the Bilateral Agreements — adjustments
need to be made now on a state-by-state basis’.
How is the NDIS being funded?
Funding for disability has long been the subject of debates
about cost and blame shifting between the Australian Government and the states
and territories. Guaranteed future funding for disability services was part of
the rationale for the NDIS.
The Productivity Commission noted
that ‘current funding for disability is subject to the vagaries of governments’
budget cycles’ and proposed that 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’.
The method of financing agreed between the Gillard
Government and state and territory governments is different to the two main
approaches proposed by the Productivity Commission. State and territory governments
and the Australian Government jointly provide funding based on bilateral
agreements, with funding coming from a combination of sources.
Under the various agreements, existing money spent by the
Australian and state and territory governments on disability services is being
redirected to the NDIS.
In addition, funds for the NDIS are taken from the July
2014 increase to the Medicare levy (from 1.5 per cent to 2.0 per cent
of taxable income). Revenue raised from increasing the Medicare levy is
directed to a special fund—the DisabilityCare
Australia Fund—for the purpose of reimbursing governments for NDIS
expenditure. In contrast to the Productivity Commission model, the increased
Medicare levy is not designed to meet the full revenue needs of the scheme
(just as the levy only partially covers the annual cost of Medicare).
In the 2017–18
Budget, the Australian Government proposed to raise the Medicare levy by
half a percentage point to 2.5 per cent of taxable income to help fund its
contribution to the NDIS. Shortly before the 2018–19 Budget, the Government announced
it would not be increasing the Medicare levy as it could ‘fully fund’ the NDIS
without doing so.
Any NDIS funding not offset by the above sources must come
from general budget revenue or borrowings.
of the NDIS is shared between the Australian and state and territory governments.
The main governance arrangements are:
- the NDIS is administered by the NDIA and is governed by a Board
- decisions on NDIS policy are made by the Disability
Reform Council, which is a COAG Ministerial Council
- the NDIA holds NDIS funds contributed by participating
governments in a single pool, manages these funds, administers access to the NDIS
and approves the payment of individualised packages
- the NDIS Board is responsible for the performance and strategic
direction of the NDIA
- the NDIA Board is advised by the NDIS’s Independent
Advisory Council and
- the Australian Government Minister for Social Services
administers the NDIS Act, and has the power to make the NDIS Rules and give
direction to the NDIA (with the agreement of the states and territories).
The NDIS Quality
and Safeguards Commission was established in
December 2017 to oversee the quality of NDIS services, regulate providers,
investigate complaints, and provide nationally consistent protections for
participants. It started operating in New South Wales and South
Australia from 1 July 2018 and will progressively begin operating in other
states until achieving national coverage on 1 July 2020.
Implementation challenges and
The NDIS is a major and complex reform. It has raised
expectations of a transformation in the provision of support to people with
disability, but it has and will face a range of challenges
as it is implemented.
Questions that will need to be considered as the scheme
- How much ‘choice
and control’ will be available to NDIS participants and what will ‘reasonable
and necessary supports’ mean in practice?
- How will the NDIS ensure equitable access to supports for Indigenous
- How will the NDIA address gaps in services for people with psychosocial
- How will continuity
of support be ensured for people who are not
eligible for the NDIS?
- Will the NDIA be able to reach the planned
intake of 475,000 participants by 2019–20?
- Why are participants not utilising all of the
committed supports in their plans? Reasons
could include participants facing difficulties navigating the system, a
relatively immature market for support co-ordination and plan management, and
insufficient market capacity to supply supports. This raises a further question
of how such issues will be addressed.
- How will risks
to the financial sustainability of the NDIS be managed?
- How will disability service providers adjust
to the new market-based system?
- Will there be sufficient service
providers and disability
care workers to meet demand?
- How will the interaction between the NDIS and mainstream
supports, such as the health
system, be managed?
- How might disagreements
between participating governments on decisions relating to the NDIS be
- Will the shared funding model blur responsibility for funding the
NDIS, and hence risk
the funding certainty the NDIS was intended to provide?
- L Buckmaster and S Clark, The
National Disability Insurance Scheme: a chronology, Research paper
series, 2018–19, Parliamentary Library, Canberra, 2018.
- L Buckmaster and J Tomaras, National
Disability Insurance Scheme Bill 2012, Bills digest, 72, 2012–13,
Parliamentary Library, Canberra, 2013.
Standing Committee on the National Disability Insurance Scheme website.
- National Commission of Audit, ‘The National Disability
Insurance Scheme’, in Towards
responsible government: the report of the National Commission of Audit: phase
one, February 2014, pp. 90–4.
- National Disability Insurance Scheme (NDIS), ‘Publications’, NDIS
- Productivity Commission, Disability
care and support, Report, 54, Productivity Commission, Canberra,
- Productivity Commission, National
Disability Insurance Scheme (NDIS) costs, Study report, Productivity
Commission, Canberra, October 2017.
- J Whalan, P Acton and J Harmer, A
review of the capabilities of the National Disability Insurance Agency, NDIA, January 2014.
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