As the lead market steward the NDIA are able to take actions that
directly influence the marketplace and its development. These include setting prices
for NDIS supports, commissioning supports or establishing preferred provider
The first part of the chapter examines pricing under the NDIS and the
impacts of current price caps on the development of the market.
The second part focuses on the issues of thin markets and provider of
last resort arrangements. It discusses existing and potential intervention
mechanisms which could reduce the occurrence of thin markets.
Pricing of NDIS supports
Prices are currently regulated by the NDIA, which sets maximum prices
('price caps') for most of the supports provided by NDIA registered providers.
The aim is to 'ensure NDIS participants obtain reasonable value from their
The NDIA says it takes into account market risks, when setting price
controls to protect against supply gaps and ensure participants receive
Price controls do not apply for supports purchased by self-managing
participants from unregistered providers.
The NDIA anticipates that prices will be eventually deregulated as the
market matures in size and quality.
In the NDIS Costs Study Report, the Productivity Commission
expressed concern that while the price-setting mechanism is held within the
NDIA, there is an incentive for it to be used to offset budget pressures.
Some submitters expressed similar concerns and argued that prices should
be set primarily to boost market development, not to enable the NDIA to manage
the NDIS budget.
Many inquiry participants are of the view that there is a need for an
independent body to regulate prices.
For example, the Victorian Government is of the view that 'the establishment of
an independent price regulator will give providers and participants certainty
and transparency about pricing'.
Having an independent price regulator would also avoid a potential
conflict of interest for the NDIA as it both sets prices and has responsibility
for the financial sustainability of the Scheme.
This echoes the recommendation made by the Productivity Commission,
which suggested a staged approach to independent price regulation.
The Productivity Commission proposed that the Quality and Safeguards
Commission (the Commission) first start with monitoring prices set by the NDIA
to enhance transparency in the short term. The second stage would transfer the
price-setting powers to the Commission in July 2020. In the longer term, it is
envisaged that deregulation could occur, but that the Commission would retain a
price monitoring role.
Inquiry participants expressed support for the monitoring and reviewing
of price caps by the Commission.
Adequacy of pricing
The NDIA reviews and updates price caps on at least an annual basis
effective 1 July each year, taking account of market trends, changes in costs
and wage rates.
The issue of price caps and adequacy of pricing is not new and has been
raised on many occasions, including by past inquiries undertaken by this
committee, the NDIA FY2017-18 Price Review, and the Productivity Commission
NDIS Costs Study.
Key issues raised by service providers in relation to pricing included:
the high level of administrative work that providers undertake as
part of the NDIS service delivery is not factored in the NDIS pricing;
the pricing structure also does not provision of adequate
supervision, mentoring and training of staff;
provider travel cost and time;
the low pricing for some supports, including some delivered by
Allied Health professionals;
the low pricing to deliver supports to people with complex needs;
the low pricing to deliver supports in rural and remote areas;
Overwhelmingly, submitters are of the view that NDIS pricing has been
preventing the development of the market, threatening the financial viability
of many organisations and leading to providers considering exiting the market.
Independent Pricing Review (IPR)
In June 2017, as a result of the concern expressed by many service
providers, the Board of the NDIA commissioned McKinsey & Company (McKinsey
& Co) to undertake an Independent Pricing Review (IPR) to investigate the
appropriateness of the NDIA's pricing strategy and approach, and the
suitability of current price levels.
In March 2018, the Board of the NDIA released the IPR Report, giving in
principle support for all of the Report's 25 recommendations.
From the 1 July 2018, the NDIA started to implement the first set of
recommendations from the IPR. This includes:
Recommendation 4: providers can now charge up to 45 minutes of
travel time in rural areas.
Recommendation 9: new price caps have been introduced for group
supports activities and include an allowance for capital costs.
Recommendation 10: new price limits have been introduced for
short term accommodation.
Recommendation 14: introduction of a temporary financial relief
for providers as they transition their business operations of 2.5 percent
loading to support standard intensity attendant care supports.
Recommendation 15: providers can now charge 90 percent of the service
booking price for short notice cancellation, up to a maximum of 12
cancellations per year for core supports and 6 hours per year for therapy.
Recommendation 16: pricing adjustment for group care arrangements
in a centre.
Recommendation 18: the hourly rate for therapy assistants
(level1) has been increased.
Recommendation 19: the $1000 cap for therapist travel has been
Recommendation 20: amendment of the cancellation policy for
Recommendation 21: providers can now claim time for writing reports
requested by the NDIA.
Sector response to some
Following the release of the IPR Report, some recommendations were
highly criticised by the sector, especially allied health professionals.
For example, Occupational Therapy Australia (OTA) believes that the
recommendations arising from the review threaten market readiness as well as
Goldfields Individual & Family Support Association Inc. (GIFSA) is
of the view that the IPR 'lacks evidence and the language used is subjective'.
OTA contended that despite five of the 25 recommendations being highly
relevant to allied health providers, none of the major allied health
professions were approach for input.
Tiered pricing model
In particular, the IPR's recommendation proposing the introduction of a
tiered pricing model attracted criticism from allied health professionals.
Speech Pathology Australia reported that the initial recommendations for tiered
pricing did not ease the concerns of its members.
Ms Rachel Norris, CEO of OTA explained:
The proposed tier fee structure, with participants being
categorised according to the complexity of their condition, is, we contend,
unworkable. Neither McKinsey nor the NDIA has so far explained who will
determine a participant's complexity or how it will be measured. [...] We contend
that a flat rate be determined, which is simple and sustainable.
OTA conducted a survey on the review's recommendations, which clearly
showed that many providers would not remain NDIS registered providers if a
tiered pricing structure was introduced.
Therapy Focus also raised concerns about a tiered pricing structure, and
further argued that the implementation of the recommendation on therapy price
limits would see the viability of therapy providers severely challenged, with
market failure becoming a real possibility.
Further consultations on the way
OTA explained that as a result of the backlash from allied health
professions, the NDIA was ultimately obliged to defer the introduction of
several key recommendations.
The NDIA stated that it 'has recognised that the implementation of some recommendations
required further detailed work or greater consultation with the sector' and
'work is being undertaken as a matter of priority'. In particular in relation
Recommendation 6 – defining complexity,
Recommendation 7 – price tier that accounts for complexity of
Recommendation 9 – high intensity loading for centre based
Recommendation 17 – therapy price limits,
Recommendation 18 – therapy assistants (phase 2).
Who is it working for?
The committee heard that, at present, the service providers that can do
well under the NDIS pricing system are sole traders or tech-enabled providers,
which serve participants via online platforms.
One submitter noted that in the IPR Report the examples of successes
were located in niche markets:
I have to be honest and say that the examples that were held
up of people fitting within the NDIA's efficient pricing methodology were sole
traders or Uber type services connecting people through websites.
At a public hearing, when asked what the sector would look like in a few
years, a service provider responded 'Serco and BUPA', implying that the trend
of service providers 'cherry picking' clients and no longer servicing
participants with high and complex needs would continue to rise.
Another provider also said that under the current approach,
organisations that service people with high and complex needs will not exist in
a few years' time.
Dr Ken Baker, CEO of the National Disability Services pointed out that
even the IPR analysis of a small sample of disability providers found that 75
percent of them were not operating profitably with NDIS prices and concluded:
We need the great majority to be operating profitably to get
investment in growth. Pricing is one of the key barriers to growth.
Independent price setter
The committee agrees that, at present, price controls are needed as the
market is still in its infancy. The committee is of the view that setting
adequate price caps is paramount for ensuring market growth and the
sustainability of the sector. Importantly, service providers must be able under
NDIS pricing to deliver high quality services to participants without
jeopardising their business sustainability. The committee was troubled to hear
that many service providers were unable to operate even moderately profitably
under NDIS pricing.
The committee agrees with the view that while price setting is held
within the NDIA, there is an inherent risk for price setting to be used to offset
budget pressures. In this context, an independent body is best placed to
monitor and analyse market trends, and make recommendations about pricing of
disability supports. The committee agrees with the Productivity Commission and
inquiry participants that the Quality and Safeguards Commission (the
Commission) should take on the role of price monitor and price setter until the
market reaches maturity, and that this role should be supported and facilitated
and funded by the Australian Government.
The committee recommends the Australian Government allocate resources to
the Commission to establish a strategic unit responsible for the monitoring and
review of NDIS prices with the aim of transferring the price setting powers to
the Commission in July 2020.
Independent Pricing Review
The committee continues to hear that NDIS pricing is hindering market
development and growth. More concerning is that, in some instances, it has led
to service providers discontinuing services to NDIS participants. The committee
acknowledges that the NDIA has undertaken some steps to address the issue of
pricing shortfalls through the commissioning of the IPR and the subsequent
implementation of some of its recommendations. It is too early to assess if
these changes, which took effect on 1 July 2018, will have a positive impact on
the market. The committee therefore is of the view that the changes be
evaluated at the first available opportunity.
The committee recommends that an evaluation of the IPR recommendations
is undertaken as part of the next annual NDIS pricing review.
Pricing of services for people with
high and complex needs
The committee has heard on many occasions that the NDIS pricing
framework is not working for participants with high and complex needs. The
committee is of the view that unsustainable pricing caps may lead to service
providers choosing not to accept clients with complex needs. Indeed, the
committee has heard evidence that some service providers are 'cherry picking'
clients and potentially leaving some of the most vulnerable NDIS participants
with no access to adequate services.
Feedback from the sector strongly indicates that the IPR recommendations
on the pricing methodology and quantum of pricing for delivering supports to
participants with high and complex needs are inappropriate. In particular, providers
are sceptical about the ability of the NDIA and its planners to determine the
level of complexity of a participant. The sector also believes that the
proposed three tier pricing structure is not workable.
The committee understands that, following vigorous protests from the
sector, the NDIA is now reviewing these particular recommendations. The
committee recommends the NDIA work with allied health service providers to find
a way forward.
The committee recommends the NDIA work with allied health professions
peak bodies and service providers to co-design a suitable methodology for
pricing supports to participants with high and complex needs.
The issue of thin markets has been raised in previous inquiries
undertaken by the committee and the Productivity Commission.
As the market steward, it is the role of the NDIA to put in place policies and
interventions to minimise the occurrence of thin markets.
Occurrence of thin markets
During the inquiry, the committee heard that thin markets are persisting
or worsening for some groups, including:
participants living in rural and remote areas;
participants with high and complex needs;
participants who are from CALD backgrounds;and
Aboriginal and Torres Strait Islander participants, including in both
remote and urban areas.
NDIA initiatives to address thin
Market intervention framework
The NDIS Market Approach –Statement of Opportunity and Intent,
published in November 2016, commits the NDIA to market interventions.
To operationalise its market approach to thin markets, the NDIA says 'it
is now developing a market intervention strategy and an analytical framework to
create a process for identifying and responding to thin markets'.
At a hearing in Cairns on 14 March 2018, Ms Liz Neville, Branch Manager,
NDIA talked about the work underway around the production of the market
This work in developing a market intervention framework is
effectively an operating model for helping us understand when we do need to
intervene and what the seriousness of the intervention should be. It is a model
that will wrap around some of the existing good practice that already occurs at
At a hearing in Sydney on 4 July 2018, Dr Ken Baker, CEO of National
Disability Services (NDS), reiterated the need for clarity about interventions
We know that a market enablement framework is being developed
but we haven't had sight of it, or at least I haven't.
At the time of writing, the NDIA is yet to release the market intervention
The NDIA says it has used its role as price setter to address thin
market issues and risk of market failure. For example:
In the case of short-term accommodation or centre based
respite, there were concerns that we would have a market failure situation for
that particular class of support, and we adjusted the price. We felt the price
was relevant in that case, so we have adjusted the price.
The IPR Recommendations 3 and 4 attempt to address the issue of pricing
for delivering services in rural and remote areas where thin markets are an
ongoing issue. Ms Liz Neville from the NDIA commented:
Recommendation 3 allows us to explore the opportunity for
quotation for support in remote and very remote areas, as compared to our
current model which involves reliance on an individualised funding model with a
25 per cent rural and remote loading. That's a significant departure.
Potential solutions and initiatives
identified by the sector
Throughout the inquiry, the committee heard that alternative funding
models, including block funding, direct commissioning, seed funding and grants
to encourage and support diversity of providers in thin market areas should be considered
by the NDIA.
For example, Mr Peter Mewett, CEO of Cootharinga North Queensland, put
forward the proposal of bulk-purchasing arrangements for a limited time to
We spoke to McKinsey and suggested that [...] you should
potentially look at bulk purchasing arrangements for a couple of years [...]. The
market doesn't exist. If a provider is prepared to put in the investment to
develop a market, you should potentially look at having a bulk purchase
arrangement in that market for, say, two years, but after that it's all bets
Ms Gail Mulcair, CEO of Speech Pathology Australia, put forward that to
develop the market and address some of the service issues in rural and remote
areas, the NDIA should consider 'providing system-wide funding and structural
supports for services to be delivered via tele-practice'.
NACCHO submitted that some of the issues could be addressed if Aboriginal
Community Controlled Health Services became providers of NDIS services beyond
providing allied health services. However, some barriers exist, including the pricing
of services below cost to provider, the need for upfront investment, and lack
of available disability workers.
Multipurpose Service model (MPS)
Mr Tom Symondson, CEO of the Victorian Healthcare Association, is of the
view that a multipurpose service model (MPS) would address the issue of thin
markets and avoid the need for a provider of last resort to be appointed.
The MPS model is used in the aged care sector, as a solution to market
failure in rural and remote areas. The MPS model amalgamates all or most health
and aged care services within a community under a single, locally governed
organisation. An essential feature underpinning the MPS program is the pooling
of state and Commonwealth program funds. The pooled funding budget is provided
to a local community controlled MPS agency, which can allocate funding
according to community needs for health and aged care services.
According to the Victorian Healthcare Association the MPS model has been
shown to be successful in enabling integrated health, community and aged care
services in small rural communities,
and the Association is proposing a trial of the MPS model as an alternative
model for providers of NDIS services in rural and remote areas.
The committee is concerned with the lack of progress on addressing the
issue of thin markets experienced by some groups. As market steward, the NDIA should
take a proactive role and put in place strategies and intervention mechanisms
to address the significant risk of market failure in some areas and for some
groups. The thin markets identified are not new; it is now urgent that the NDIA
intervene beyond making small adjustments to pricing.
The committee is of the view that the NDIA must finalise and publicly
release its market intervention framework as a matter of urgency. The framework
must clearly outline the processes the NDIA will put in place to respond to
thin markets and the intervention options it will use.
The committee recommends the NDIA publicly release its Market
Intervention Framework as a matter of urgency.
Multipurpose service model
The committee is of the view that the NDIA must work with the sector to address
persisting and emerging thin markets. The NDIA should consider and trial some
of the proposals put forward by submitters. For example, the committee sees potential
in the MPS model used in the aged care sector in Victoria as a possible solution
to market failure in rural and remote areas. The committee recommends the NDIA
trial the MPS model in rural and remote Victoria as this will the NDIA to
utilise the experience and expertise of the Victorian Healthcare Association
and other organisations, which are familiar with the MPS model.
The committee recommends the NDIA trial the MPS model in rural and
remote Victoria and publicly report on its effectiveness with an evaluation
after 12 months of operations.
Provider of last resort
As market steward, the NDIA is responsible for the provider of last
resort (PLR) arrangements. Under the circumstances of insufficient market
supply with no provider available or in the event of provider failure, the NDIA
may directly commission and procure disability supports for Scheme
However, as stated in the NDIS Market Approach Statement of
Opportunity and Intent, during transition, states and territories continue
to lead as PLR and will continue to do so for providers that they fund during transition.
The NDIA says it will, over time, lead an integrated response jointly
with states and territories as transition leads to full Scheme.
Provider of Last Resort policy (PLR
In the Transitional Arrangements for the NDIS report, the committee
expressed its concerns that PLR arrangements remained unclear and incomplete.
It recommended the NDIA accelerate its work with state and territory
governments to progress future PLR arrangements, and called for the NDIA to
publically release its PLR policy as a matter of urgency.
The NDIA provided an update on its work at a public hearing held in
Cairns in March 2018:
We are at the moment working on a project, and we will be
reporting to the Disability Reform Council at its next meeting on clarifying
exactly what the agency's role is with respect to the so-called provider of
You will find that we are moving away from that language
somewhat. We refer to this project as being concerned with how we maintain
critical supports for people, so where they might be at risk of relinquishment
for various reasons.
That work will help us clarify precisely what the agency's
role is, bearing in mind that our role is somewhat different to the states and
territories, many of whom have been in the business of delivering disability
supports and taking on a natural provider of last resort arrangement. The
agency is not in that position, and nor do we intend to be in the business of
service delivery, so the model is necessarily different.
One submitter expressed concerns about the change of language to
'maintaining critical supports', worrying that 'any substitute mechanism for a
PLR framework should not lead to the need for a person to justify that a
support is "critical" in order to access the mechanism'.
During the inquiry, submitters continued to call for the publication of
the PLR policy as a matter of priority.
Mr Tom Symondson, CEO of the Victorian Healthcare Association, noted the
lack of progress:
We haven't seen anywhere near as much work as we would like
to have seen on issues such as provider of last resort or thin markets. Our
recommendation is that work be accelerated, and we're very happy to support
As discussed in the Transitional arrangements for the NDIS report,
there are concerns that existing state and territory government processes for
emergencies will cease, despite new emergency arrangements having yet to be
Several submitters argued that the need for clarity is a matter of some
Queenslanders with Disability Network argued that a clear pathway is essential to
ensure that people have access to essential services and do not get 'stuck' in
other service systems.
The Office of the Public Advocate (OPA) SA drew attention to the situation
in South Australia, where it is unclear how crisis service provision will
operate after the state government's role ceased on 30 June 2018. The OPA drew
attention to the lack of arrangements in place for participants to be provided
with a disability focused response in the event of an after-hours emergency. It
warned that, without appropriate arrangements in place, it is likely that
clients will be inappropriately admitted to hospitals or the correctional
system. It suggested that sufficient funds for clients at risk of emergency
should be built into plans, as guardianship services are not resourced to
undertake service coordination, and as a result, a gap in service provision can
arise if a participant requires an emergency response.
Despite being halfway through NDIS rollout in Tasmania, the Mental
Health Council of Tasmania highlighted that the state remains without a clear
framework for a provider of last resort.
The Queensland Government told the committee that the state government
continues to deliver a service for accommodation support and for respite
service, and, where the market generally might not be able to provide the
support to a person, the provider of last resort could be put in place. However,
for full scheme, the state does not have a policy position.
Ms Helen Ferguson, Senior Executive Director, Department of Communities,
Disability Services and Seniors, also addressed some of the interface issues:
...the Queensland government does continue to pay where there
are interface rubs. Where the NDIA is yet to resolve the application of the
interface principle in favour of the person with disability and their situation
and the person is left in dire straits, the Queensland government will pay for
that. In terms of the health interface, that is an area of ongoing negotiation
nationally, in terms of transport interface, particularly transport interface.
In terms of child protection, as you've noted in your question there, those
areas are areas where, at a national level, we are having ongoing, deep
negotiations about the application of the applied principles around roles and
responsibilities between the NDIA and state and territory governments for those
matters. Some of those lines are grey and need to be worked through, and some
of those lines, in a number of respects, seem to be more clear and yet are
still being worked through.
Similarly, the Office of the Public Advocate NT argued that the process
for enacting the Provider of Last Resort in the Territory is unclear and that
delays are currently being experienced in addressing crisis situations as a
result of a critical supports market failure. It argued that a lead agency is
required to review who is responsible for responding to crisis requests.
The Office of the Public Advocate VIC argued that the NDIA, as market
steward, should commission crisis and respite accommodation for participants. It
encouraged the NDIA to develop a streamlined plan review process to respond to
participants with an acute and immediate need for crisis care and
In response to questions from the committee, DSS advised that the NDIA
is progressing work on maintaining critical supports for those requiring
critical disability supports. However, this work does not replace the ongoing
responsibility of mainstream services, including emergency accommodation, to
ensure that a person with disability has access to universal services.
With regard to the change terminology from 'Provider of Last Resort' to
'Maintaining Critical Supports', the committee is concerned that the effect of
the change may be to limit the types of services that meet the criteria. The
committee seeks assurance that the policy will seek to provide services where
there are none available, and that the types of services are not limited by
restrictive terminology, but instead are determined according to participant
The Australian Government supported Recommendation 18 made by the
committee in the Transitional Arrangements for the NDIS report, which
says 'the committee recommends the NDIA publicly release its Provider of Last
Resort policy as a matter of urgency'.
In its supporting comments, the Australian Government advised that the NDIA
would publish the outcomes of its Maintaining Critical Supports project,
following the DRC endorsement of the proposed policies and processes in the
first half of 2018.
The Australian Government supported in-principle Recommendation 9 made
by the committee in the Transitional Arrangements for the NDIS report,
which says 'the committee recommends that the Australian, state and territory
governments and the NDIA work together urgently to include crisis accommodation
and Provider of Last Resort arrangements for housing in their respective
bilateral agreements and operational plans'.
In its supporting comments, the Australian Government said the Maintaining
Critical Supports project and its operational framework will include
consideration of the future arrangements and roles of all parties, including
those relating to crisis accommodation. The committee is concerned that the
NDIA is yet to release a policy on future PLR arrangements.
The committee recommends the NDIA publicly release the outcomes of the
Maintaining Critical Supports project and its policy on Provider of Last Resort
arrangements as a matter of urgency.
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