This is a draft report based on my research into NDIS Costs over the last 2 years. I would ultimately like to get this published in the media as there are so many factual inaccuracies about the NDIS and NDIS costs being published by journalists who are not across the detail of this complex system.
I am an NDIS participant myself since 2017 when the NDIS rolled out in Castlemaine, Victoria. I have Psychosocial Disability, and developed Schizoaffective Disorder in 2006 when I was 27, and from 2013 to 2018 had Delusional Disorder. In 2019 I got a late diagnosis of Autism Spectrum Disorder Level 2. I have above average verbal IQ so my disabilities do not impact on my ability to research NDIS costs.
I began to research NDIS costs in 2020 after the NDIA and the Minister started saying the NDIS was unsustainable and that they would make us have the Independent Assessments. I was actively part of the campaign against the Independent Assessments in 2020 and 2021.
In my research I found some big problems with the NDIS costs, including wage inflation from the February 2012 Fair Work SCHADS decision, and the Parliament being given an outdated and significantly lower cost estimate by the Gillard Labor Government while the NDIS Bill was being debated in early 2013.
I have a BA in history from ACU and got half way though a MA in Urban Planning at Melbourne University before my mental illness got too bad for me to study anymore. My MA coursework included an economics subject and multiple policy subjects.
After the idea of an NDIS was raised at the Rudd Government’s April 2008 “2020 Summit” Labor got the Productivity Commission to do a cost benefit analysis of an NDIS.
History of NDIS Cost Estimates 2011-2012
The Productivity Commission handed the report to the Gillard Labor Government in 2011.
The Productivity Commission cost estimate for the NDIS at “full scheme” was $13.6 billion.
“Full scheme” is the term used to describe the time when the NDIS became fully rolled out nationally. The NDIS began the transition to full scheme in 2017, after a trial period from 2013-2017. In mid-2020 the NDIS entered full scheme.
The 2011 Productivity Commission Report figure of $13.6 billion was in 2011 dollars, i.e. what the NDIS would cost if it was implemented fully in 2011. It did not take inflation into account at all.
Prior to the NDIS the Federal, State, and Territory Governments funded disability services at $7.1 billion a year. So the figure of $13.6 billion was almost double the existing funding for disability services, or an additional $6.5 billion.
Price Waterhouse Cooper also published a report on the NDIS in 2011. This report is quite bizarre as it has a graph of the NDIS costing $15 billion a year long into the future. That was not what the Productivity Commission 2011 Report said, and the Price Waterhouse Cooper report provides no justification for these figures. I have been unable to find more information on this.
In February 2012 the Fair Work Commission handed down an important decision on the SCHADS Award. This was reported widely and was publicly celebrated by PM Julia Gillard. The Labor Government was therefore aware of it.
The SCHADS Decision stated that under the Fair Work Act 2009 workers in non-government organisations were entitled to the same wages as workers in the government sector doing the same job. The NDIS was heavily exposed to the SCHADS Decision because disability services were provided by both the government and the non-government sectors. As the NDIS was rolled out nationally the proportion serviced by the non-government sector would increase as the NDIS is a market based program.
The SCHADS wage rises included a 19% raise for Level 2 workers and 41% raise for Level 8 workers. The SCHADS wage rises were to be implemented over several years.
Following the Fair Work SCHADS Decision in 2012 the Treasury asked the Australian Government Actuary to update the cost estimate of the NDIS.
This cost estimate was $22 billion at full scheme and included the SCHADS decision and other wage inflation. It expected the NDIS to enter full scheme in 2018-2019.
This estimate of $22 billion was $8.4 billion more than the 2011 estimate of $13.6 billion for the NDIS, and it was $14.9 billion more than the $7.1 billion that had been spend on disability supports prior to the NDIS.
The Productivity Commission 2017 Report on NDIS Costs broke down the 2012 $22 billion figure, saying that $6.38 billion was due to the Fair Work SCHADS Decision and other wage inflation, while additional non-wage factors were responsible for the other $2.02 billion in increased costs.
There is no information I can find saying how much of the $6.38 billion was due specifically to the SCHADS Decision, and how much was due to other normal wage inflation, but ordinary wage inflation from 2013 to 2020 was not that high.
The updated estimate of $22 billion was obtained via FOI by the Centre for Independent Studies in 2012 and the figure was published in a 2012 work by Andrew Baker, now of DSS, called The New Leviathan: A National Disability Insurance Scheme.
On 14th of November 2012 9News did an online citing the $22 billion figure obtained by the Centre for Independent Studies ‘Disability insurance scheme to “blow out”’.
“A Centre for Independent Studies report says the scheme will become “the new leviathan of the Australian welfare state”. It cites a secret review by the Australian Government Actuary (AGA) released under freedom of information that revealed the NDIS will provide disability care to 441,000 people at a cost of $22 billion a year or $50,000 per person when it is fully operational in 2018-19.”
The full 2012 report by the Actuary is available on the Treasury website.
The NDIS did not end up entering full scheme in financial year 2018-2019 it entered full scheme in mid-2020 which is between two financial years. The average of the two financial years 2019-2020 and 2020-2021 is just under $22 billion per year.
So the Actuary was really accurate in their 2012 updating of the NDIS cost estimate, and the NDIS was on track with this estimate.
In 2017 the PBO estimated the NDIS would cost $24.0 billion in 2019-2020, so the NDIS actually came in under that estimate. (See “Welfare—What Does It Cost” on APH website).
There are quite a lot of cost estimates made from 2011 onwards, and the media unfortunately are not across all the different cost estimates that have been made.
NDIS Bill Parliamentary Debate 2012-2013
The Gillard Labor Government did not give Parliament the 2012 updated NDIS cost of $22 billion, instead they gave Parliament the 2011 cost that did not take into consideration the SCHADS Decision or any inflation.
I am shocked and disappointed that the Gillard Government gave Parliament the wrong and outdated cost estimate, and that Parliament did not actually debate the costs properly. The entire debate on the NDIS Bill went for less than 2 months, from February 2013 to 21st of March 2013 when the NDIS Act passed both Houses of Parliament. There were only three mentions of the cost of the NDIS at full scheme in the entire debate. I believe this was a rushed and not thorough debate, that did a disservice to severely disabled Australians.
On 29th of November 2012 Julia Gillard introduced the NDIS Bill to Parliament, but there was no debate as the Parliament went on holidays for Christmas.
After Christmas holidays the Parliament began to debate the NDIS Bill in February 2013.
In the February 2013 Bills Digest by Luke Buckmaster it states the NDIS will cost “nearly $14 billion” using the outdated 2011 estimate.
“The Commission estimated that the NDIS would cost an additional $6.5 billion annually. When added to current annual expenditure on disability services of $7.1 billion, this would amount to an increase in funding of around 90%” p. 8
“As noted in the Parliamentary Library’s Budget Review 2012-2013: …. ’The estimated annual cost (nearly $14 billion) is around the same amount spent on the disability support pension…’” p. 18
This does not make clear that the cost “nearly $14 billion” is from the outdated 2011 estimate made in 2011 dollars, and does not mention the 2012 updated estimate of $22 billion.
In the Debate no Cabinet Ministers spoke other than Prime Minister Gillard herself and the relevant Minister, Jenny Macklin.
Only 3 politicians mentioned the cost of the NDIS at full scheme: LNP MP Paul Fletcher, ALP MP Ed Husic, and Independent Andrew Wilkie.
On 7th of February 2013 Paul Fletcher cited the $22 billion figure by the Australian Government Actuary:
“According to a report issued by the Centre for Independent Studies, drawing on a review conducted by the Australian Government Actuary, which was obtained under freedom of information legislation, the cost of the NDIS by the projected first year of operation, 2018-19, is likely to be around $22 billion a year—substantially greater than the $15 billion figure usually quoted—and the costs are likely to rise each year.”
Ed Husic, also spoke on 7th of February 2013 following Fletcher, and he immediately rebutted Fletcher by claiming the NDIS would cost “$15 billion”:
“This is not going to come cheaply. It will require a major contribution. Providing the level of support needed to ensure we liberate people from the anxiety of long-term care has a potential cost of $15 billion a year. In time, I think we will need to think laterally about the way we fund the NDIS.”
Andrew Wilkie simply stated that it didn’t matter what the NDIS would cost.
I think this is fiscally irresponsible and also not fair to disabled NDIS participants who have now spent almost 2 years in turmoil because of claims the NDIS is not financially sustainable. And this is during a global pandemic when we are already stressed and at risk of dying ourselves, or losing our elderly parents who support us to COVID-19.
The NDIS Bill was passed by both Houses of Parliament on 21 March 2013.
In the May Budget 2013 Labor admitted the cost estimate of the NDIS was $22 billion.
Medicare Levy and Funding the NDIS (Edited 26/06/2022)
In April 2013 the media reported on speculation that Labor was planning on funding the NDIS via an increase to the Medicare Levy.
‘Prime Minister Julia Gillard is refusing to engage in budget speculation including suggestions an increase in the Medicare levy could be used to fund the national disability insurance scheme. “I’m simply not playing the game,” she told ABC radio on Wednesday.’ — SBS 24/04/2013
On 1 May 2013 Prime Minister Julia Gillard confirmed Labor would increase the Medicare Levy by 0.5% to pay for the NDIS.
Opposition Leader Tony Abbott agreed to support this, and on 15 May 2013 Labor introduced legislation for the 0.5% increase in the Medicare Levy to help raise funds for the NDIS with bipartisan support. The legislation was passed by both houses just “a day after a teary-eyed Prime Minister Julia Gillard introduced new bills increasing the Medicare Levy.”
This increased the Medicare Levy from 1.5% to 2%. Three-quarters of this revenue goes to Medicare and one-quarter to the NDIS.
2013 was a year with a Labor leadership change, and a federal election. Kevin Rudd became Prime Minister for a second time in June 2013, and in September 2013 following the election the LNP took over as Government and Tony Abbott became Prime Minister.
The increase to the Medicare Levy does not raise much funding compared to the increased costs of disability support funding following the introduction of the NDIS.
In 2014-15 the Medicare + NDIS Levy raised $14.6 billion, with $10.75 billion going to Medicare, and only $3.85 billion going to the NDIS. These figures come from the Centre of Independent Studies work Fiscal Fiction: The Real Medicare Levy.
Disability support funding went from $7.1 billion in 2011 to $22 billion in 2020, to almost $30 billion in 2021-22. That is an increase of almost $23 billion — or a bit over a quadrupling of funding — in a single decade.
In 2017-2018 the LNP, now led by Prime Minister Malcolm Turnbull, proposed another 0.5% increase to the Medicare Levy to raise more funds for the NDIS.
The Labor Opposition refused to support this, with Opposition Leader Bill Shorten saying that it was a tax on ordinary workers. Shorten wanted the Levy increase to only apply to the top two tax brackers, whereas the Coaliton Government wanted it to apply to everyone earning over $21,000 p.a.
There have been no additional taxes or levies to raise funds for the NDIS since the first 0.5% increase to the Medicare Levy.
The Morrison Government said the NDIS would be funded under consolidated revenue.
However the Australian Federal Government Budget has been in deficit every year since 2011-2012 and consolidated revenue is not able to cover all the costs of Government spending.
NDIS Costs as a % of GDP
The costs of disabiliity supports is growing as a percentage of GDP.
It was 0.47% prior to NDIS and is expected to be around 2.3% by 2030.
Australian GDP was about $1.5 trillion in 2011-2012 according to ABS. 2011 Disability Supports cost around $7.1 billion which was about 0.47% of GDP. The Productivity Commission 2011 estimate for the NDIS cost of $13.6 billion was about 0.9% of GDP.
GDP was $1.9 trillion according to ABS in 2019-2020. $22 billion cost of the NDIS in 2020 was about 1.2% of GDP.
GDP is expected to be $2.058 trillion in 2021-2022 according to APH, and the NDIS is expected to cost just under $30 billion which is 1.457% of GDP.
GDP is expected to be $2.6 trillion in 2030, as Treasury estimates a growth rate of 2.6% per year. In 2030 the NDIA Actuary estimates the NDIS will cost $60 billion, this would be 2.3% of GDP.
So Disability Supports have gone from 0.47% of GDP to 1.457% of GDP in around a decade, and are exopected to reach 2.3% of GDP in 8 years.
Australia currently has a tax to GDP ratio of 28%.
Federal revenue is 23% of GDP (about $500 billion), and States and Territories combined collect another 5% of GDP ($100 billion) as revenue.
The coalition had an election platform of Federal revenue collection not exceeding 23% of GDP. Labor has not announced any new taxation revenue collection. The Greens have announced a policy to collect more tax via taxing billionaires.
As a comparison, Finland has a tax to GDP ratio of 43%.
In the current economy every 5% equals around $100 billion, so if our tax to GDP ratio was lifted by 15% to be 43% like Finland’s it would bring in $300 billion more per year in revenue.
For a decade Australia has been running Budget deficits because our spending exceeds our revenue, and the population does not want the Government to cut back on spending in popular programs. If anything the population wants more spending on programs such as aged care, mental health, child care, and climate change.
Roughly a third of all taxes in Australia go to healthcare ($202 billion per year), and a sixth go to education ($100 billion), so of our total taxation revenue 50% is taken up by healthcare and education.
This leaves only 50% of revenue (or $300 billion) for everything else, including the NDIS, Centrelink, My Aged Care, Child Care, Defence, Infrastructure, Housing, Foreign Affairs, the Environment and Climate Change.
Australia has not followed the recommendations of the 2010 Henry Tax Review, and we have an outdated tax system that is not fit for purpose.
The selfish “Big Miners” attacked Kevin Rudd when he tried to implement the Henry Tax Review’s recommendation for a Mining Resources Tax. This led to political destabilisation of our Federal Government and no Government since then has dared to stand up to these selfish interests and implement much needed tax reform.
NDIS Costs to 2030
In the 2022 election campaign Labor talked about reducing costs by cutting down on lawyers at the AAT but lawyers only cost $28 million over 6 months, which is a tiny fraction (0.09%) of what the NDIS costs per year currenlty. Cutting all of the lawyers would barely make a dint in the cost of the NDIS.
The main driver of the NDIS costs are the cost of participants’ supports.
There are three factors to this:
- the number of participants
- the amount of participant supports granted in plans and utilised by participants
- the wages, overheads, and profits charged by providers
The Actuary’s 2012 updated cost estimate said at full scheme (then expected to be in 2018-2019) the average cost per participant would be $50,000.
In February 2021 the CEO Martin Hoffman told the Australian Financial Review that the average plan cost per participant was $52,000.
That is only a $2000 difference, which is not a lot.
Now the average cost per participant has gone up to $57,800, but the Actuary in 2012 didn’t give an estimate for the years after 2018-19.
The average participant plan cost is a lot lower than the average participant plan funding, because utilisation rates are under 100%.
In the latest figures I have, the average plan funding is $68,500 while the average plan cost is only $57,800 due to below 100% utilisation.
Average plan funding grew rapidly between 2017 and 2020.
The NDIS rapidly grew between 2017 and 2020, taking on new staff and contractors, as well as new participants. 2017 was the year that the NDIS entered the “Transition to Full Scheme” period, following the earlier trial sites period. This meant the NDIA and LACs had to take on new staff. 2018-2019 was the period where there was an NDIS “underspend” of billions of dollars due to there being fewer participants than estimated. Following this the NDIA made an effort to recruit more participants quickly.
In 2017-2018 average plan funding was $38,000.
In 2018-2019 average plan funding went up to $46,000.
In 2019-2020 average plan funding went up to $61,000.
In 2020 average plan funding was $71,000.
In 2021 average plan funding went slightly down to $68,500.
In the period 2017-2019 the NDIA CEO was Rob de Luca, appointed by Minister Christian Porter. De Luca had no experience in disability or in the government sector. He was previosly Managing Director of BankWest. If you look on the Australian Parliament House website Rob de Luca gets grilled by a Nationals Senator about BankWest and the GFC. The Nationals Senator implies that under Rob de Luca BankWest told valuers what to value property as, in a corrupt way. Rob de Luca left the NDIA and went into working for Zenitas Healthcare that then tried to get the Independent Assessment contracts, which many of us feel was unethical.
Martin Hoffman was appointed NDIA CEO in November 2019, Hoffman had prior experience in the government sector, but became CEO when the NDIS was only 7 months away from entering full scheme. Under de Luca the NDIA attempted to begin to manage costs escalating with Operation Greenlight which was set up around March 2018. This turned into the Independent Assessments proposal, which was resolutely rejected by most participants, including myself, as well as by experts and the sector.
By 2030 the NDIS is expected to cost about $60 billion per year.
The media has been concentrating on reporting about the financial unsustainability of the NDIS by focusing on the participant plan funding going up so much, but actually by 2030 the average participant plan spend is only estimated to be $68,905, compared to $57,800 now. That is only growth of $1400 per year on average.
The main driver of the cost increases expected between now and 2030 is not the average plan spend going up, but the projected increase in participant numbers.
The Actuary estimates that a lot more participants especially those with a primary disability of Autism Spectrum Disorder, followed by Psychosocial Disability), and then Intellectual Disability will join the NDIS between now and 2030.
The NDIA 2021 Sustainability Report estimated that by 2030 the total number of participants with Autism as a primary disability will be 339,035.
The prevalence of Autism is estimated by WHO at 1 in 100, and in Australia in 2015 the prevalence of people diagnosed with Autism was 1 in 150, and Autism Spectrum Australia estimates that 1 in 70 Australians have autism.
If we take the 1 in 70 figure, that is 367,000.
So the NDIA Actuary is assuming that almost every Australian with Autism will be an NDIS participant with a primary disability of Autism by 2030, or else they are assuming the prevalence of Autism is higher than 1 in 70.
Some Autistic NDIS participants like me do not have Autism as our primary disability. My primary disability for the NDIS is Psychosocial Disability. Autism is listed as my Secondary Disability. The NDIS IT system makes us choose just one of our disabilities to be our “primary disability” if we have multiple disabilties.
My cousin Jessica is a modeller for the Commonwealth Bank and she said she can’t really analyse these figures and how the different estimates relate, without access to the model and the data and the assumptions the Scheme Actuary is using.
But the NDIA refuses to provide access to the models.
Jessica told me the Government gave the four big banks access to data so they could model Covid-19 scenarios in 2020.
Why can’t this be done with the NDIS?
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Problems with the NDIS Act 2013
The problem of the higher than expected number of participants is caused by the NDIS Act 2013, which is unclear about who is eligible for the NDIS.
The Productivity Commission stated the NDIS was for people with “severe” disability, but the NDIS Act states it is for “significant” disability. There is no explanation of what “significant” disability is and is not.
The eligibility criteria in the Act is circular logic, saying someone is eligible for the NDIS if they have significant and permanent disability and they need NDIS supports. It is extremely circular to say someone is eligible for a program if they need it.
The NDIS funding is uncapped so there is no cap on the number of participants. In other Government programs eligibility may be based on set criteria or else scarce funding create an eligibiliity cut off point.
Another change in the NDIS Act from the 2011 Productivity Commission Report is the planning process.
The Productivity Commission design was for an internal NDIA planning process from start to finish, where participants met with one NDIA planner, and that planner interviewed us, read our reports and letters, and gave us a functional assessment. The Act only specifies that plans need to be done by a delegate of the CEO, and the NDIA farmed out most of the planning process to the Local Area Coordinator contractors after PM Abbott instigated staffing caps at the NDIA.
Tier 2 of the NDIA is also not mentioned in the NDIS Act. The Productivity Commission design for the NDIS had 3 Tiers.
Tier 1 was the whole of Australia — everyone who knows the NDIS is there for them and their loved ones if they become disabled, and many of whom contribute to the costs of the NDIS via taxes.
Tier 2 was disabled people who were not eligible for the NDIS, and would have their needs met via help to access mainstream services and by Tier 2 encouraging communtiies and businesses to be more accessible and inclusive of people with disabilities. This was not for disability services. It was for making mainstream services accessible for disabled people and able to meet disabled people’s needs.
Tier 3 was for disabled people who were eligible for NDIS plan funding.
Tier 2 was completely left out of the NDIS Act and then forgotten.
Bruce Bonyhady and John Walsh both say that this was detrimental for the costs of the NDIS as well as for the wellbeing of disabled people not-eligible for the NDIS.
Conclusion
These issues will now be difficult to address.
It will be hard for any Government to introduce clearer eligibility criteria for the NDIS that could make some existing participants ineligible.
Because of the botched Independent Assessment proposal it is going to be very difficult to convince participants and their families that the planning process should standardise functional assessments in any way. But the current planning process is completely inconsistent and varies from person to person as to whether someone gets a stingy plan or a generous plan.
Tier 2 has support from the NDIS community, but there is general unhappiness when the NDIS tells people to use mainstream supports rather than get NDIS funding for the support. Especially because mainstream supports often do not exist, and if they do exist they may charge us something that we then have to find the money for, or else they may be low quality (for example the Disability Employment Services).
One thing to remember is many NDIS participants only income is Centrelink. All Centrelink payments are below the poverty line. Many of us experience housing insecurity and can’t find appropriate public housing, and NDIS Specialist Disability Accommodation housing is only for a small number of participants, and we face social isolation due to our disabilities and low incomes.
The interaction between NDIS and other Government programs and mainstream supports has not been well managed to date.
This leaves many participants relying mainly on the NDIS for their quality of life.
Zoe Emily Mithen 