DEEP DIVE INTO NDIS SUSTAINABILITY

This is where the big numbers and questions start.

The NDIA are projecting that by 2030 there will be 870,761 participants in the NDIS whereas, just 4 years ago, the Productivity Commission forecast 582,860 participants would be in the Scheme.

This represents a 49% difference! Did the Productivity Commission really get it that wrong? 

Source: Annual Financial Sustainability
Report Summary – Interim update

A quick visual analysis of the chart above raises some pretty obvious questions. The NDIS has spent 4 years below the projected numbers and now we will suddenly diverge so rapidly and by so much?

In 2017 the Productivity Commission said that there would be a delay in the NDIS meeting its bilateral estimates due to the delays in the early roll out of the NDIS.

“If the current trend continues, it will take an additional year (2020-21) before all 475 000 participants will be in the scheme though this delay could be longer if the scheme falls further behind the bilateral estimates when the participant intake ramps up in 2017-18”

However, what the NDIA sustainability report says, is that the number of people in the population that will enter the Scheme (267 per 100,000 people) up from 177 per 100,000 people that drove the Productivity Commission’s 2017 assumptions. 

Source: Annual Financial Sustainability
Report Summary – Interim update

DIA has so many questions on what the 267 per 100,000 of people represents! What isn’t clear is:

• The detail behind how the 267 assumption arrived at? (In our view the detail in the Appendix is threadbare).
• Is the 267 assumption used in each of the forward years?
• Is the 267 assumption then applied to the current disability cohorts? And if so, why has there been such a change in the past 4 years?

This begs the question – Where have these people been considering we are now at “Full Scheme”?

• We know that they won’t be in the State system as the States have moved quickly to transition these people;
• Surely the NDIA don’t believe these extra people are self-funding their support and will now move into the NDIS? 

Considering that to be accepted by the Scheme, disability needs to be “permanent and significant” so how can this number change (almost 100 extra people per 100,000) without a change in the accessibility rules? If anything the fear within the disability community is that being accepted is becoming harder, not easier.

The NDIA give only some explanation to how these numbers increase by so much between now and 2030 buried under a table on Page 58:

The increase in projected participant numbers prior to 2030 is mainly attributable to higher assumed prevalence of developmental delay. After 2030, autism and intellectual disability are the main drivers of increasing participant numbers, reflecting the transition of children with developmental delay to autism and intellectual disability. The trajectory is consistent with the increasing trends seen in successive Surveys of Disability, Caring and Ageing (released by the ABS) but based on Scheme experience is projected to increase at a faster rate.

Source: Annual Financial Sustainability
Report Summary – Interim update

We find the description doesn’t seem to align with the in the table. The lack of detail, information and explanation disappointing.

Firstly the statement, “The increase in projected participant numbers prior to 2030 is mainly attributable to higher assumed prevalence of developmental delay” is inaccurate based on the data from the table. See below DIA analysis using the data from the table.

Secondly the statement, ‘After 2030, autism and intellectual disability are the main drivers of increasing participant numbers, reflecting the transition of children with developmental delay to autism and intellectual disability.” is inaccurate based on the data provided by the NDIA above – as you can see from the DIA analysis below has created prior to 2030 Autism remains the largest increase both in terms of actual numbers and percentage.

Increase by total number 2021 to 2030 based on NDIA data

Increase as a percentage 2021 to 2030 based on NDIA data

The description not really reflecting the data in graph makes us further ask – are you sure?

As we all experience in our daily lives, inflation of prices is an ongoing economic reality with fluctuating levels depending on the prevailing economic conditions. We would therefore expect the NDIS to experience a similar reality.

The NDIA has flagged that ‘superimposed inflation’ (inflation above the level experienced in the general economy) in the Scheme is a critical sustainability issue.

Source: Annual Financial Sustainability
Report Summary – Interim update

What struck DIA with this table is the proportion of the expected superimposed inflation that can’t be explained! ‘Additional Inflation’ accounts for 8% (0.6%, 3.00% and 4.4%) of the expected 14.3% inflation rate over the forecast period! In any modelling a reasonable amount of buffer is acceptable, but over 50%? We don’t buy that! Also, an increase in utilisation accounts for another 6% which will delve a bit deeper into later.

A couple of other anomalies stuck out:

• Why does Plan Management, Support Coordination and ‘Additional Inflation’ end in 2023 – 2024?
  
• 2021-22 Super inflation for Support Coordination of 0.1%, when Support Coordination (and Plan Management as well) has not received any increase to the NDIS price limit, no increase CPI nothing, so how does the NDIA really believe this will increase when the sector has already taken a haircut to the price limit.
• Transport in 2022 – 2023?
• The second instalment of “Additional Inflation” in 2025 – 2026? and;
• ATHM in 2022 – 2023?
• Also, the TTP has been a known part of the price settings and the glide path of its removal is also well publicised, so how can this be a negative in terms of inflation? And remember, the TTP prices are linked to underlying supports which are subject to at least Fair Work increases

The entire superimposed inflation table lacks any underlying explanations to the inflation rates presented and with over 50% of the supposed increases under “Additional Inflation”, it is incredibly difficult to give any credibility to the assertions made on the back of these rates.

Further the underlying assumption that inflation will be see across the sector every year for 2021 – 2030, however this is simply not the case. Whist CPI pressure are constantly felt by providers the NDIA has on a number occasions, including in 2021, have not increased all price limits and participants plans to reflect CPI. In the most recently announced NDIS Pricing Arrangements and Price Limits (price Guide) more than half of all service line items were not increased to factor in CPI, increases in Super or increase in Wage Settings.

In terms of Plan Management and Support Coordination which is called out as contributing to the increased costs as:

“Increasing use of support coordination and of plan management. This reflects a greater desire from participants for more choice and control”.

Source: Annual Financial Sustainability
Report Summary – Interim update

In terms of the numbers let’s do a quick calculation to gauge the monetary impact that this will have in 2022 – 2023.

Projected Scheme “cost” in 2022 – 2023 is $32.436bln.

• Plan Management “inflation” is forecast at 0.1%. In terms of ‘cost’ this equals $32.43 million, which equates to an additional 21,500 participants using a Plan Manager at an average yearly ‘cost’ of $1,500. 
• Support Coordination inflation is forecast at 0.2%. In terms of ‘cost’ this equals $64.86 million, which equates to an additional 21,200 participants using a Support Coordinator for just under 30 hours at Level 2.
  

Hardly a huge sustainability problem for the NDIS, the anticipated increase in Plan Management and Support Coordination is less than $100 million, whilst dramatically increasing choice and control and delivering benefit to both participants and the Scheme (which is not discussed anywhere in the report). The social return on this support is fantastic, let alone the outcomes generated whilst maximising the value of a participants plan.

Scheme exits are tracking below the baseline rates in 2020 but we aren’t given any detail as to why this may be the case and how this may change in the future. In terms of the 0 – 6 age cohort are there issues in executing the ECEI targets that underpinned the forecasts in the 2021 – 2022 PBS forecast?

It’s concerning that forecasts prepared for the current budget year can be so far from what is happening with exit rates for the 0 – 6 age group being circa 0.5% whereas the PBS forecast was 2%. 

Source: Annual Financial Sustainability
Report Summary – Interim update

It’s concerning that the past year has seen declining exit rates for those over 7 years of age.

Whilst concerning it’s hardly a surprise considering the issues plaguing the aged care system that would, on assumption, attract a large portion of the participants reaching 65 years of age.

This is also a point worth thinking about from a holistic economy of view – seeing as we are all hung up about sustainability. The NDIS and Aged Care are funded from essentially the same pot of public money so, if there is a greater retention rate of 65 year plus aged participants in the NDIS then this would reduce the funding required in the Aged Care sector! (Granted not $1 for $1 due to the difference in funding levels but certainly enough to be of significance). 

Don’t just take DIA’s word for it, the Productivity Commission said:

“Participants aged 65 years and over The proportion of NDIS costs that is attributable to participants aged 65 years and over will increase over time. This suggests that the share of total NDIS funding provided by the Australian Government will increase substantially over time as it is responsible for the funding of all participants aged 65 years and over (and all Indigenous participants aged over 50 years). This does not necessarily mean that there will be a sizable net cost to the Australian Government, as it also has primary funding responsibility for the aged care system.”

Source: Productivity Commission Report 2017

So just because the exit rates are lower than anticipated, it doesn’t necessarily follow that this is an extra overall cost to the government is unforeseen. These people clearly still require support and this support will need to be funded somewhere – be it the NDIS, Aged Care or Health Systems it will likely cost somewhere. DIA would love to see a greater breakdown of these figure and where participants haven’t exited the NDIS how much of a ‘saving’ has been realised by other governmental service.

Having outlined our concerns regarding the superimposed inflation assumptions, it comes as no surprise that if you take the per participant spend of 2021 – 2022 and apply the project inflation rates year-on-year you naturally get an acceleration of the per participant payments. Remember, over half of this superimposed inflation is categorized as ‘Additional Inflation’ with the remainder being made up of mostly an increase in assumed plan utilisation. 

Source: Annual Financial Sustainability
Report Summary – Interim update

The increased utilisation assumption is based on the observed relationship between increased utilisation rates and the length of time, expressed by the number of plans a participant has received, that a participant has been in the Scheme with data from 1 April 2020 to 30 September 2020 referenced: 

Source: Annual Financial Sustainability
Report Summary – Interim update

What is questionable is using this short-term snapshot, to infer an enevitable increase the level of utilisation based on the 5th plan utilisation number whereas the history of the Scheme suggests that utilisation is relatively stable at circa 70%. Below is information published by the NDIA in the most recent quarterly report.

Source: NDIA Q3 2020-21 Report

No surprises that by assuming an increasing number of participants in the Scheme quicker than previously forecast, as we highlighted in the Participant Entry Numbers section, it means more participants will ‘mature’ sooner and then a higher utilisation rate can be applied, or so it seems to be the case in this report! 

Further the NDIA needs to communicate the difference between plan spend, average plan value and median plan value across the duration of the scheme thus far as there three data points interact with each other. DIA has heard from 1000’s of participants that have seen ever decreasing plan values, which in turn means high utilisation rates.

So now for the BIG number that keeps getting shouted from every outlet the NDIA can send a media release to or a member of the Government can get air time on. Yep, $60 billion dollars. As we have highlighted, when you:

• Increase participants by circa 50% on previous forecasts;
• Inflate the Scheme by over 14%;
• Don’t recognise the offsetting impact that over 65 year olds not entering Aged Care or Health System settings have on that expenditure; and
• Apply all of this to participant spending;

You get:

Source: Annual Financial Sustainability
Report Summary – Interim update

This projection is widely different to the most recent PBS forecasts. DIA understand and recognise that forecasting is subjective (and more often than not by its nature wrong) but when two ‘Government’ forecasts are $9 billon different for the 2024-2025 year ($40.385 v $31.884) we really need to ask why?

Source: Annual Financial Sustainability
Report Summary – Interim update

Looking at the historical accuracy of the PBS statements on a rolling three and four year basis we see that initial estimates tend to have an accuracy rate of approximately 85% to 90% which narrows down to roughly 6% to 7% one year out, not bad for Government work! Even better when you consider that there are a number of supports that were brought into the NDIS after this forecasting was done, such as Disability Health Supports.

Further as previously discussed, the NDIA needs to communicate the difference between plan spend, average plan value and median plan value across the duration of the scheme thus far as there three data points interact with each other. DIA has heard from 1000’s of participants that have seen ever decreasing plan values, which in turn means high utilisation rates.

One talking point that is really causing blood pressure to rise at DIA Headquarters is the often trotted out statement that ‘the NDIS will cost more than Medicare!’.  This is emotive language and being deliberately used to conjure up a negative public sentiment around the amount of money that is spent on the NDIS. Whilst based on these projections  the NDIS may tecnnicly become larger than Medicare, it is worth noting:

• Medicare is a Scheme that has universal support across the country, but what are the Government referencing when they link the cost of Medicare to the cost of the NDIS? In our view it’s not how the average person on the street would describe ‘Medicare’. 
• The average person on the street, in our experience, doesn’t know that ‘Medicare’ isn’t the holistic health system. For example Medicare doesn’t fund the State hospital systems. For most, Medicare is for going to see the GP and the ever decreasing part of the fee you pay when you see a Specialist. If we want to talk properly we should reference the holistic healthcare system which is at least 3 if not 4 times the cost of the NDIS.