National Disability Insurance Scheme

Budget Review 2012–13 Index

Luke Buckmaster

The Government has committed $1.0 billion over four years for the first stage of the National Disability Insurance Scheme (NDIS), to be established in up to four locations from 2013–14. The locations will be determined through negotiations between the Australian Government and the states and territories. In its first year, the NDIS will provide care and support for up to 10 000 people with significant and permanent disability. This will increase to 20 000 people from 2014–15.[1]

What is the NDIS?

In recent years, there have been increasing calls from within the disability sector in Australia for the introduction of a new mechanism for funding support for people with disability. In 2009, in response to these calls, the then Rudd Government requested that the Productivity Commission (the Commission) investigate ‘the feasibility of new approaches, including a social insurance model, for funding and delivering long-term disability care and support for people with severe or profound disabilities however they are acquired’.[2] The Commission reported to Government on 31 July 2011, finding:

The current disability support system is underfunded, unfair, fragmented, and inefficient. It gives people with a disability little choice, no certainty of access to appropriate supports and little scope to participate in the community.[3]

In response, the Commission presented recommendations for a new disability care and support scheme, the NDIS, in which all Australians with a significant and ongoing disability (around 410 000 people) would get long-term care and support.[4]

The Commission proposed that the NDIS would include the following features:

  • entitlements to individually tailored supports based on the same assessment process
  • certainty of funding based on need
  • genuine choice over how needs are met (including choice of provider)
  • local area coordinators and disability support organisations to provide grass roots support and
  • a long-term approach to care with a strong incentive to fund cost effective early interventions.[5]

Commonwealth, state and territory governments would establish a single agency, the National Disability Insurance Agency (NDIA), to administer and fund the NDIS. Services would be provided by non-government organisations, disability service organisations, state and territory disability service providers, individuals and mainstream businesses.[6]

The Commission emphasised the role of increased choice for people with disabilities under the proposed NDIS:

… support packages would be tailored to their individual needs. People could choose their own provider(s), ask an intermediary to assemble the best package on their behalf, cash out their funding allocation and direct the funding to areas of need (with appropriate probity controls and support), or choose a combination of these options.[7]

The Commission estimated that the NDIS would require an additional $6.5 billion annually. When added to current annual expenditure on disability services of $7.1 billion, this would amount to an increase in funding of around 90 per cent. Noting that ‘current funding for disability is subject to the vagaries of governments' budget cycles’, the Commission proposed that the Commonwealth Government ‘should finance the entire costs of the NDIS by directing payments from consolidated revenue into a ‘National Disability Insurance Premium Fund’, using an agreed formula entrenched in legislation’.[8]

On release of the Commission’s report, the Gillard Government announced that it would ‘start work immediately with states and territories on measures that will build the foundations for a National Disability Insurance Scheme’.[9]

What is being funded?

On 30 April 2012, the Prime Minister, Julia Gillard, announced that the Government would fund its ‘share’ of the cost of the first stage of the NDIS in the 2012–13 Budget.[10] The Government’s NDIS media release accompanying the Budget states that its share includes ‘the total administration and running costs for the first stage of an NDIS’.[11] In addition the media release says that ‘states and territories that host the initial locations will also be required to contribute to the cost of personal care and support for people with disability’. At this stage, it is not clear what the Government has in mind as ‘locations’ for the first stage of the NDIS but the Commission’s proposal was for ‘regions that each contained a modest number of people who were likely to be eligible for the scheme (say, around 10 000 per region)’.[12] Commencement of the NDIS in 2013 is one year ahead of the timetable proposed by the Commission.

The $1.0 billion to be provided by the Australian Government includes:

  • $342.5 million over three years from July next year for individually funded packages for people with significant and permanent disability
  • $154.8 million over three years from July next year to employ Local Area Coordinators to provide an individualised approach to delivering care and support to people with a disability
  • $58.6 million over three years from July next year to assess the needs of people with a disability in the launch locations
  • $122.6 million over four years to start preparing the disability sector for the new way of delivering disability services
  • $240.3 million over four years to build and operate an NDIS information technology system and
  • $53.0 million over four years to establish a new National Disability Transition Agency to coordinate implementation and manage the delivery of care and support to people with a disability and their carers in the initial launch locations from 2013–14.[13]


The NDIS will be a major and highly complex reform to the way in which disability care and support are funded. It is likely to have far-reaching effects throughout the disability services sector. The NDIS will also represent a significant new area of Commonwealth responsibility and expenditure. The estimated annual cost (nearly $14 billion) is around the same amount spent on the Disability Support Pension, more than the current annual cost of the Pharmaceutical Benefits Scheme ($10 billion), and not substantially less than the current annual cost of Medicare ($18 billion).[14]

Currently, the states and territories provide around $4.7 billion for disability services, while the Commonwealth Government provides around $2.3 billion.[15] As such, if the NDIS was to be fully funded by the Commonwealth, this would require a renegotiation of national disability funding arrangements. Renegotiations of Commonwealth, state and territory financial arrangements tend to be complex and problematic.  

The Government’s decision to introduce the NDIS has been almost universally welcomed by people in the disability sector and across the broader community. The Opposition Leader, Mr Abbott, has offered the Government ‘bipartisan support for a responsible and timely NDIS’.[16] State and territory governments have also committed themselves to the establishment of the NDIS through the Council of Australian Governments (COAG) process.[17]

It is probably fair to suggest that much of the support for the NDIS relates to the concept of addressing the problems with the disability system outlined above, rather than a widespread understanding of the details of how the NDIS is intended to operate. To date, the only details available on the design of the NDIS are in the form of ‘high level principles’ agreed by COAG.[18]

A COAG Select Council on Disability Reform has commenced work on ‘funding, governance and the scope of eligibility and support’ of the NDIS for consideration at the next COAG meeting, which is expected to be later in 2012.[19] In the absence of such details it is difficult to make a proper assessment of the NDIS, including whether it is likely to be effective in addressing the problems identified by the Productivity Commission.

The question of how the NDIS will be funded (will be there be an agreed formula entrenched in legislation?) is crucial in determining whether the longstanding problem of funding shortfalls will be adequately addressed. In the absence of an adequate and secure funding base, the NDIS would, in the long run, provide little advance on current arrangements. Governance issues will also be important—particularly those relating to relationships between the main institutional structures (NDIA and local area coordinators), entitlement holders and those engaged to provide support.

Determining precisely who will be eligible for support and what supports can be provided will also be crucial. Despite the proposed significant increase in funding, the NDIA will inevitably need to make difficult decisions about who and what will be included in the NDIS. The decision about where these lines are drawn will have important consequences for affected individuals, their families and the overall effectiveness of the NDIS.

[1].       Australian Government, Budget measures: budget paper no. 2: 2012–13, Commonwealth of Australia, Canberra, 2012, pp. 142–3, viewed 11 May 2012.

[2].       J Macklin (Minister for Families, Housing, Community Services and Indigenous Affairs) and B Shorten (Parliamentary Secretary for Disabilities and Children’s Services), Disability Investment Group report released, media release, 3 December 2009, viewed 11 May 2012.

[3].       Productivity Commission, Disability care and support: Productivity Commission inquiry report: volume 1, Report, no. 54, Productivity Commission, Melbourne, 2011, p. 2, viewed 11 May 2012.

[4].       The Commission also recommended a second, smaller scheme, the National Injury Insurance Scheme (NIIS), which would cover the lifetime care and support needs of people who acquire a catastrophic injury from an accident (based on the motor accident compensation schemes that operate in some states and territories).

[5].       Ibid.

[6].       Ibid.

[7].       Ibid., p. 3.

[8].       Ibid.

[9].       J Gillard (Prime Minister), Productivity Commission's final report into disability care and support, media release, 10 August 2011, viewed 11 May 2012.

[10].     J Gillard, National Disability Insurance Scheme to launch in 2013, media release, 30 April 2012, viewed 11 May 2012.

[11].     J Macklin (Minister for Families, Housing, Community Services and Indigenous Affairs) and J Gillard (Prime Minister), Funding the first stage of the National Disability Insurance Scheme, media release, 8 May 2012, viewed 11 May 2012.

[12].     Productivity Commission, Disability care and support: Productivity Commission inquiry report: volume 2, Report, no. 54, Productivity Commission, Melbourne, 2011, p. 932, viewed 11 May 2012.

[13].     Ibid.

[14].     Australian Government, Budget strategy and outlook: budget paper No. 1: 2012–13, Commonwealth of Australia, Canberra, 2012, p. 6–10, viewed 11 May 2012.

[15].     Productivity Commission, op. cit., p. 3.

[16].     C Bennett, ‘Abbott backs national disability schemeSydney Morning Herald, 30 April 2012, viewed 11 May 2012.

[17].     Council of Australian Governments (COAG), ‘Communique’, COAG Meeting, Canberra, 13 April 2012, p. 6, viewed 11 May 2012.

[18].     Ibid.

[19].     Ibid., p. 7.

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