Why free market approach to NDIS design is responsible for huge blowout in costs to taxpayers
The NDIS was meant to be based on free market principles and the individual. But its ballooning costs are now requiring major Federal Government intervention.
The NDIS was meant to be about the individual above the state.
Unlike other government agencies, it was meant to be less bureaucratic.
Free markets are meant to be about smaller government.
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By continuing you agree to our Terms and Privacy Policy.Instead, a 13-year-old agency centred around the dignity of the individual and choice is a white elephant that rivals the Defence budget for cost, even during a time of geopolitical uncertainty.
Legislating a program, based on the recommendations of a Productivity Commission report, has ultimately led to ballooning demands on the public purse, health economist and former health administrator Stephen Duckett told The Nightly.
“The idea of this very, very, very individualistic approach I think was wrongheaded,” he said.
“The whole idea was there was a market out there that people could participate in and get services.
“Don’t forget the Productivity Commission is a very market-oriented body and they applied that market-oriented lens, without thinking whether there was a market.”
Unlike the traditional consumer market, buyers of a service have been unable to compare products and benefit from that competition.
Little data is available on how satisfied participants are with what they are getting.
The National Disability Insurance Scheme, originally designed for those with severe and permanent disabilities who can’t work or look after themselves, has grown exponentially based on new participants with autism and psychosocial disabilities.
“It reflects the fact that services outside the NDIS are poor. States often withdrew services when the NDIS was started and so the only way for people to get services was to get listed on the NDIS,” Dr Duckett said.
Politically, it’s hard for any government to prune back eligibility given Labor prime minister Julia Gillard 13 years ago had bipartisan support from the Liberal Party’s then otherwise pugnacious leader Tony Abbott when her government legislated the NDIS based on Productivity Commission recommendations.
Instead of kicking out participants, the Commonwealth can only slow the intake. The National Disability Insurance Agency, which administers the NDIS, has long had trouble limiting programs since its inception.
Without any further tightening, the cost of the NDIS is expected to continue growing at more than twice the already-high inflation rate for at least the next four years.
After interest payments on Federal Government debt, the NDIS is tipped by Treasury to have the fastest growth during this financial year.
It’s already the third most expensive individual program in the Budget, not including the separate components of Defence.
The cost to taxpayers is increasing at an even faster pace than the army and navy together, despite the high costs of the AUKUS submarine deal to deal with a more assertive China.
It’s also outpacing the expense of looking after seniors, even though baby boomers are set to represent the biggest generation to enter retirement.
The NDIS is projected to cost $52.3 billion in 2025-26 with an annual growth pace of 7.8 per cent — already more than double the 3.7 per cent inflation rate.
By 2028-29, the program is tipped to keep growing at 7.8 per cent a year, by which time the NDIS would cost the Budget $63.6 billion.
The disability care program now has 761,442 recipients — more than double the initial 360,000 intake envisaged in 2012 for those with the most severe disabilities.
When it started in 2014-15, beyond being a trial, the NDIS had 19,817 recipients with the average package costing $38,423.
A decade later, the average payment per participant almost doubled to $67,200.
When Labor came to office in 2022, NDIS costs were growing at 13.8 per cent a year.
Bill Shorten, the former NDIS minister during Labor’s first term in power, launched a taskforce two years later to crack down on providers overcharging participants.
His successor Mark Butler last year announced that from July 2026, autistic kids would be placed into a new Thriving Kids program instead of the NDIS. The start date has been pushed out to October to give the states and territories more time.
He’s addressing the National Press Club again on Wednesday, three weeks out from the Budget to flag changes to slow down the annual cost increases to something the taxpayers can afford.
