NDIS rollout: huge business opportunity in $22 billion funding

June 30, 2016

In the biggest change to government benefits since Medicare, Australia's $22 billion a year National Disability Insurance Scheme (NDIS) begins its roll-out on Friday.

It will double the level of public spending on disability and will create a contestable market for services worth an estimated $16 billion a year.

"It marks a huge change," said Bruce Bonyhady, chairman of the National Disability Insurance Agency, which runs the NDIS.

"We are moving from a fragmented and underfunded welfare model to an insurance model that will base support on need."

He said it would end the current system in which the level of assistance for disabled people depended on the state they lived in and the cause of their disability.

After three years of pilot schemes, the NDIS, which enjoys bipartisan support, will roll out over the next three years but its high cost will put heavy pressure on the federal budget.

Even with the 0.5 percentage point increase to the Medicare levy introduced two years ago to help fund the scheme, the federal government says there will be a budget cost of $5 billion in 2019-20 when it is fully up and running.

Many funding details remain unclear 

The states and territories will also contribute to the scheme with money saved by cutting existing services for the disabled, which the NDIS will replace. 

But many details of the scheme's funding are not clear. Richard Madden, the director of the National Centre for Classification in Health at the University of Sydney, said there should be a transparent set of cost projections for the scheme.

Professor Madden, who last year published a paper on the impact of the NDIS on the federal budget, said the government could offer more confidence to the public that the cost estimates were well-based.

"They should release their full actuarial reports on the scheme," he said.

Mr Bonyhady said that his agency's actuaries had collected a lot of data during the pilot programs, which found that the costs were on track. "When we do that, $22 billion remains the best estimate of the full scheme costs," he said.

In three years' time, the NDIS would be funding more than 400,000 people and bringing the benefits of a contestable market to disability services, he said.

Under the scheme, disabled people will be assessed for their needs and receive regular payments to meet the cost of equipment, the cost of improving their skills and capacity, and the cost of their personal care. They will be able to choose who provides their services and, within limits, what type of services they will receive.

Big change for welfare sector 

Many more service-providing organisations, including for-profit companies, are expected to enter the market. It is a big change for the welfare sector, which must now get ready to compete for disabled peoples' business. 

"It will open up a whole new marketplace for disability services. There will be huge opportunities, not just for the not-for-profit sector but also for for-profit providers," Mr Bonyhady said.

He said the size of the contestable market for disabled services would grow by an estimated three to four times to about $16 billion annually.

The scheme is intended to help people who are not working to enter the workforce where possible, thus bringing economic benefits. The 2011 Productivity Commission report, which recommended the scheme, said the economic benefits would outweigh the costs.

Therese Sands, co-CEO of People with Disability Australia, said the NDIS rollout was a "significant and exciting" milestone for disabled people. She said it marked the end of the present "crisis-driven system" with long waiting lists.

However, she said that, for disabled people to enjoy the full benefits, the community would have to accept them and be ready to give them jobs.

Read more: http://www.afr.com/news/politics/national/ndis-rollout-huge-business-opportunity-in-22-billion-a-year-funding-20160630-gpvg3t#ixzz4DOvt9z9H 
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