This annual financial sustainability report is required under section 180B of the NDIS Act. This report provides an assessment of the financial sustainability of the NDIS after the three year trial period.
The Scheme at 30 June 2016
At 30 June 2016, 30 281 participants have had approved plans. Comparison between the revenue received during the trial from both the Commonwealth and state and territory governments (the “funding envelope”) and the amount of support used by participants, results in a small surplus over the three years (approximately 1.5 per cent of the funding envelope).
Whilst the Scheme was within the funding envelope for the three years of trial, there are some current pressures which are requiring management responses. These pressures are:
- higher than expected numbers of children entering the Scheme
- increasing package costs over and above the impacts of inflation and ageing (“super-imposed” inflation)
- potential participants continuing to approach the Scheme
- lower than expected participants exiting the Scheme
- a mismatch between benchmark package costs and actual package costs.
NDIS insurance approach
The NDIS insurance approach allows pressures on the Scheme to be identified early and for management responses put in place to respond to these pressures. Specifically, data is collected on participants (including the characteristics of the participants, costs and outcomes), and this actual experience is compared with the baseline projection. This actuarial monitoring occurs continuously and allows management to put in place strategies as required.
It is not unreasonable that some emerging pressures are evident after three years of the Scheme. This is common in any statutory insurance or social welfare reform, and also reflects the fast implementation of the NDIS. The current pressures are a reflection of the original implementation, and learning from this implementation has assisted with the management responses.
Importantly the data and evidence is available to understand what is driving these pressures and operational responses are underway to address the cost pressures. All else being equal, if these responses are as effective as expected then the trends identified should be mitigated, and it is reasonable to expect financial sustainability throughout transition and full Scheme.
Two specific initiatives are the Early Childhood Early Intervention (ECEI) approach and the reference package and first plan approach.
- The ECEI approach is being progressively rolled out. The ECEI approach provides a gateway to the Scheme for children 0-6 years, which aims to ensure only children meeting the eligibly criteria for the NDIS enter as a participant. The gateway also provides support for children to access mainstream and community services when they do not meet the criteria, but need some support to access these services.
- The reference package and first plan process is a method for better aligning the level of function and need with support packages for participants when they first enter the Scheme. This process is now underway, but ongoing refinement of this process to ensure the right assessment tools and questions are used is critical. This method for allocating funds should also be a focus at plan review. Importantly, this process assists in determining the reasonable and necessary support package from which participants can then plan their supports to meet their goals.
In addition to these two initiatives, NDIA management has put in place a Sustainability and Liability Review Working Group led by the CEO to oversee the initiatives addressing the cost pressures identified above. Further initiatives include:
- Analysis of reasonable and necessary costs across the lifespan with emphasis on levels of community participation and supports to live outside of the family home (including supported independent living). This analysis leverages work undertaken by the Independent Advisory Council (IAC or the Council) on reasonable and necessary support.
- Development of guidelines on reasonable levels of family support across the lifespan.
- Analysis of the possibility of a gateway for people with psychosocial disability to make sure that the right people with psychosocial disability enter the Scheme and that people are supported to access mainstream and community services. Further, work on reference packages for people with psychosocial disability is also underway.
- Further guidance on chronic health conditions and the role of other support systems in supporting people with chronic health conditions.
- Investment in the School Leavers Employment Support (SLES) initiative to assist school leavers into employment. This initiative also has the potential for wider economic benefits, such as reduced reliance on income support.
A change management strategy is required to ensure these initiatives are implemented successfully. Specifically:
- training for staff and ECEI partners in the new approaches, along with appropriate support
- communication to the sector on the approaches, along with working with the sector to achieve the intended outcomes of the Scheme
- project management to oversee the implementation of the initiatives.
It will also be critically important to collect appropriate data and carefully monitor these change initiatives and the implementation of the change management strategy. The actuarial team will work closely with management to provide ongoing reporting and feedback on the process and outcomes of the above measures.