Discussion Paper
Funding the National Disability Insurance Scheme (NDIS)
Peter Cookson, December, 2012
Introduction:
At a meeting with Kelly Vincent, MLC, held in August 2012, a group of disability support
workers were able to raise some of the key problems they saw in the disability sector. The
NDIS was the first issue raised and the majority of comments reflected a real concern ‘about
the politics of its implementation’. A major concern raised and repeated by several workers
was their fear that people with a disability, their families and carers would not be ensured
the right to make their own decisions and choose the services and the service providers
required to meet their needs. The general feeling seemed to be that ‘a lot of money is being
wasted’ by government committees of ‘experts without a disability’ deciding ‘what they
think people with disability need’.
But the major concern expressed was about the funding of the NDIS. David Holst, a member
of the SA NDIS Taskforce, recently sent an email in which he wrote that ‘[understanding how
the NDIS will be funded and implemented] is still a bit like trying to catch smoke in a
butterfly net’.
The original proposal:
During the past few decades, social justice issues, particularly in the disability sector, have
been dominated in our political system purely by economic decisions and values. The needs
and rights of people with a disability have taken second place to a need to identify exactly
how much, who pays and how will they do so. For many years, the only way to ensure even
basic funding for any group of people with a specific disability has been for the group to
advocate strongly for itself alone. Those organisations unable or unwilling to advocate
strongly on their own behalf generally have only received the funding crumbs that fall from
the budget table. This funding procedure has led to a highly fragmented disability sector
where people with a disability, their families, carers, service providers, government policy
makers and bureaucrats simply argue among themselves.
Following the election of a Labor government in 2007, a proposal for an NDIS, developed by
Bruce Bonyhady, John Walsh and others, was presented at the 2020 Summit. Strongly
supported by Kevin Rudd and Jenny Macklin, the then Parliamentary Secretary for Disability,
Bill Shorten, began a real push to raise the issue of disability to a key position on the
national social policy agenda. He argued not only for a funding model to meet the basic
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human rights of people with a disability but also the need for a united disability sector with
all of us aiming for an achievable goal such as the NDIS (Manne, August, 2011).
The basic principles of that original proposal were very simple. The NDIS would:




provide a ‘no fault’ insurance based scheme for all Australians with a disability up to
the age of 65 years;
recognise disabilities which could be present at birth or caused by illness or accident
later in life;
allow people with a disability, their families and carers to be empowered to make
their own decisions and choices about services and service providers; and
be funded by a levy on all tax payers similar to the Medicare Scheme.
Bill Shorten was successful in having the proposed NDIS investigated in detail by the
Australian Productivity Commission. The final report and recommendations of the
Productivity Commission, Disability Care and Support, were handed down in August 2011.
Australian Productivity Commission, Disability Care and Support:
The key points of this inquiry included:

the current disability support system is underfunded, unfair, fragmented and
inefficient;

the main function of the NDIS would be to fund long-term high quality support ... and
around 410,000 people would receive scheme funding support;

funding of the scheme should be a core function of government (just like Medicare);

the benefits of the scheme would significantly outweigh the costs;

current funding for disability is subject to the vagaries of governments’ budget cycles.
... The Commission estimates that the amount needed to provide people with the
necessary supports would be about double current spending (an additional $6.5
billion per annum);

[the] preferred option is that the Australian Government should finance the entire
costs of the NDIS by directing payments from consolidated revenue into a ‘National
Disability Insurance Premium Fund’, using an agreed formula entrenched in
legislation;

a separate scheme is needed for people requiring lifetime care and support for
catastrophic injuries; and

a no-fault National Injury Insurance Scheme, comprising a federation of individual
state and territory schemes, would provide fully-funded care and support for all cases
of catastrophic injury.
(Australian Productivity Commission, August 10, 2011)
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How far have we come?
The Gillard government generally accepted the findings of the Productivity Commission
Report. It announced that it was committed to ‘delivering this fundamental reform to ensure
people with significant and permanent disability receive lifetime care and support,
regardless of how they acquired their disability’ (McLucas, May 1, 2012).
The government committed $1 billion over four years for the first stage of the NDIS in its
2012-13 Budget. Advisory groups and committees, both federal and state, were established
and ‘three expert groups to help inform the design of the NDIS’ were established in May
2012 (McLucas, May 1, 2012). The government also announced that it planned to set up trials
of the NDIS which would begin in July 2013, a year earlier than the commencement date
suggested by the Productivity Commission (Bonyhady, 2012).
The Federal Opposition has been somewhat vague in its commitment to the NDIS. The
Leader of the Opposition, Tony Abbott, has indicated his support for the scheme but has
generally qualified that support. As recently as mid-October, Tony Abbott was reported as
saying that ‘the scheme could be funded under a coalition government pending a strong
budget surplus [author emphasis]’ (Abbott, October 17, 2012). The coalition Finance
spokesman, Andrew Robb, has stated his commitment to the NDIS but the Shadow
Treasurer, Joe Hockey, has been highly sceptical and unwilling to make any firm public
commitment (Grattan, December 5, 2012).
Funding estimates:
As stated previously, the Productivity Commission’s estimate of the increased cost to
implement an NDIS was $6.5 billion, a doubling of current expenditures to $13 billion per
year.
In February 2012, Fair Work Australia (2012) handed down its decision in the Equal
Remuneration Case. This decision called for increases of 18% to 41% in the wages of many
of the people working in the disability sector as well as other areas. These pay increases
would be phased in from December 2012 to December 2018. In order to cater for these
increased wage costs and their impact on the NDIS, the government increased the
expenditure estimate to $15 billion per year when the scheme was fully operational in 2018
and this remains the current estimate (e.g. Baker A., November 15, 2012; Martin, October 31,
2012).
At the Council of Australian Governments (COAG) meeting in July 2012, the government
tried to arrange a series of trials in each state and territory but demanded that the state
governments contribute significant levels of funding to these trials. Although South
Australia, Tasmania and the ACT agreed, the other states initially refused to be involved.
Over the next few days, the federal government was able to resolve the dispute with
Victoria and NSW and these two states agreed to conduct trials commencing in July 2013.
However, Queensland and Western Australia have refused to provide the necessary funds
and will conduct their own trial programs. The Minister, Jenny Macklin, told the press that
the states would have to pay a share of the $8 billion in extra costs when the NDIS was fully
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operational in 2018 because ‘we think it is a shared responsibility’ (Dunlevy & Rout, July 29,
2012). At the December COAG meeting, the Prime Minister confirmed an agreement with
the NSW government that they would share the NDIS costs on a 50/50 basis.
This funding decision by the federal government is a clear breach of the Productivity
Commission’s preferred recommendation that ‘the Federal Government [should] fund the
entire cost’. The Commission’s Report also stated that this shared funding was ‘an
alternative but inferior option ... [and] such an arrangement could easily revert to the
current flawed and unfair system, with ‘agreements’ breaking down into disputes about who
is to pay, how much and for what’ (Australian Productivity Commission, 2011). The first full
report on the 1991 Commonwealth/State Disability Agreement (CSDA) reported that
in practice, the CSDA base varies between jurisdictions in a number of key areas ...
[and] neither psychiatric services nor early childhood intervention services are
included in every State or Territory, and there are other exceptions or ‘grey areas’
(Black & Eckerman, 1997).
In mid October 2012, a Senate Hearing was told by the Secretary of the Finance
Department, David Tune, that ‘no long-term funding for the NDIS had been factored in’ and
that there was ‘no plan yet for long-term NDIS funding’. The Finance Minister, Penny Wong,
added that ‘the government’s still going through a process ... of engagement with the states
about how the NDIS is to be funded’ (Cullen, October 16, 2012). The Mid-Year Economic and
Fiscal Outlook (MYEFO) statement also gave no indication of how the additional $7 billion
was to be funded (Dingle, October 23, 2012).
In late October 2012 at the National Press Club, Jenny Macklin promised more funding for
the NDIS would be available in next year’s budget although she provided no indication of
the amount. The Minister also announced the establishment of an independent Transition
Agency to ‘play the central role in ending the frustration and confusion too many people
currently face as they knock on the door of service provider after service provider looking for
the support they need’. The establishment of a Ministerial Council ‘would ensure the agency
was accountable’. Every Australian Counts spokesperson, John Della Bosca, suggested that
$4 to $5 billion would be needed ‘over the forward estimates ... That’s what we’re anxious
about’ (Martin, October 31, 2012).
In early November 2012, it was reported that discussions between federal and state
‘officials designing the [NDIS] have discussed a start date of 2020-21, two years later than
recommended by the Productivity Commission’. The NSW Disability Minister, Andrew
Constance, also said that a draft NDIS bill ‘was legalistic and would alienate people through
[its] provisions ... [and] the bill is about jobs for bureaucrats’ (Salusinszky, November 2, 2012).
The National Disability Services (NDS) reported that the National Disability Insurance
Scheme Bill 2012, introduced into Federal Parliament on November 29 2012, did not
provide details of rules of the ‘range of supports that can be funded and the criteria which
registered providers of support must meet. ... The Bill does not determine how the NDIS will
be funded or the pricing rules. Importantly the Bill allows for some (limited) funding to be
block grants’. Service providers ‘will be able to apply to manage the funding of supports
and/or be a provider of supports’ (Disability Speaks, 2012).
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Current funding issues:
Current economic and political considerations:
Although Australia’s economy is among the world’s strongest and is one of the few western
industrialised economies to have retained a triple A rating, our economy, across all areas
both federal and state, is experiencing a very difficult period of ‘tight fiscal circumstances’
(Baker K., March 5, 2012). With increasing expenditures and falling revenues, Australian
governments are trying to cut those expenditures. In Queensland, the Liberal-National
Party’s (LNP) first budget presented in October 2012 predicted that ‘revenue will drop by
$3.5 billion from last year because of lower than expected mining royalties and transfer
duty’ and in an attempt to get their ‘debt-ridden economy back on track ... 14,000 positions
will be axed from the public service’ (Kelly, October 11, 2012).
The federal government has committed itself to a very large increase in expenditure over
the next few years. In the last week of federal parliament for 2012, the Gillard government
introduced the initial legislation for the NDIS with an estimated additional cost to the
budget of $7.5 billion. They also introduced their draft legislation on the Gonski education
report with a further expected cost of around $6 billion. Over the next few years, the budget
will need to provide an additional expenditure of at least $13.5 billion.
The Gillard government has also committed itself to a budget surplus in 2013. Politically,
this is a commitment they simply can not afford to ‘back-flip’ on and fail to meet. The only
option for the government is to reduce expenditure in other areas of the budget because it
has been reported that ‘the Prime Minister had knocked back a suggestion by conservative
states for a Medicare-style levy to fund the NDIS because she feared the opposition would
seize on the proposal as a “great big new tax”’. Bill Shorten said that he also ‘share[d] the
Prime Minister’s concerns about the consequences of a negative campaign from the
opposition’ (Dunlevy & Rout, July 29, 2012).
The need for state contributions:
From the July 2012 COAG meeting and more recent statements, it seems clear that the
federal government will need to continue to rely on significant financial contributions to the
NDIS by all states and territories. With the states facing similar funding and budgetary
pressures to the federal government, it is almost certain that the ‘negotiations between
levels of government [will continue to be] notoriously difficult ... [and they] will haggle over
where to set a benchmark for their “existing spending commitment”’ (Baker K., March 5,
2012). With Queensland and WA opting out of the trials to begin in July 2013, are we already
seeing an NDIS which may fail to be a fully national scheme?
Dependence on state funding also presents a range of other problems.

In SA, the unmet needs for even basic accommodation services for people on the
Category 1 Crisis List (ie. those people with disabilities who present a serious threat
of harm to themselves or others) recently dropped by one to 572 after several years
of regular increases. The current waiting list for all services for the Category 1 Crisis
List ‘has reached a new record high level of 1296 individuals still waiting for services
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– up from 1246 in August’ (Gardner, November 5, 2012). It is clear that levels of state
based funding have failed to improve the situation for many people with disabilities.

From a national viewpoint, ‘for every 100 Australians aged under 65 years with a
severe or profound disability, fewer than 5 have access to any form of specialist
accommodation support’ (Baker K., March 5, 2012).

In several areas, both state and federal government funding has been reduced
during the past few years. In the Productivity Commission’s ‘Report on Government
Services 2012’, state and territory governments increased their disability funding (on
average) in 2010-11 by only 1.3% compared with an 8% increase in 2009-10.

The states currently provide very different relative per capita levels of funding for
people with a disability and these major inequalities between states’ funding will be
difficult to resolve.
Accuracy of the cost estimates:
The estimates of the overall costs of the NDIS have been revised upwards from the original
estimate of $10.8 billion by the Disability Investment Group (DIG) in 2009 to the final
Productivity Commission, with the added Fair Work Australia wage costs, estimate of $15
billion in February 2012. These figures are based on the original 2009-10 prices and costs
used in the Productivity Commission Draft Report calculations (Baker A., November 15, 2012).
In August 2012, following a Freedom of Information request, Treasury released a report by
the Australian Government Actuary (AGA). Taking into account expected
‘price inflation, wage growth, and population increases to 2018-19, the AGA found
that the NDIS would cost $22 billion (gross) ... The review also highlighted the need
for rigorous assessment procedures and strong governance ... to prevent cost
blowouts. ... The AGA also raised concerns about the high expectations in the
disability sector and the impact this could have during the development of the
scheme’.
(Baker A., November 15, 2012)
Andrew Baker (2012) also argues that the annual government expenditure will grow by
about 6% per year leading to an annual cost of about $29 billion by 2003-24. He refers to
the NDIS as ‘the New Leviathan’. Bill Shorten has also suggested that NDIS costs will rise by
7% per year (Dunlevy & Rout, July 29, 2012).
Hidden funding costs and issues:
Failure to maintain funding during the NDIS development period:
‘Overall, governments increased their total real expenditure on disability services
from $6.1 billion in 2009-10 to $6.2 billion in 2010-11. ... [The Productivity
Commission] Final Report recognises that funding needs to grow significantly during
the development of the NDIS to avoid escalating the cost of the new system’
(Baker K., March 5, 2012).
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The complex needs of people with disabilities:
Each person with a disability is a unique individual with their own unique set of needs and
goals. It is essential that the planning for eligibility, assessment and the individual supports
funded through the NDIS meet each person’s individual needs.
For some time there have been concerns about the ways in which governments currently
seek advice on disability issues. Expert committees, often with the same people serving on
several advisory groups at the same time, may not necessarily provide reliable advice. For
example, in an email to the Board of the Intellectual Disability Association of SA (IDASA), the
Chairman, David Holst, raised his concerns about the unrepresentative nature of the
Ministerial Disability Advisory Council (MDAC), concerns also raised in the Strong Voices
report (Social Inclusion Unit, 2011). David Holst argued that current MDAC members

must be approved by the Minister;

are elected by current members; and

are seen by government as reflective of community opinion.
This membership procedure can in no way provide a balanced, representative view of the
full range of complex disability issues. David Holst suggested that the consumers of
government policy, the people with disability themselves, their families, carers and support
staff, be involved in selecting their own representatives to such advisory groups. Recently
there has been an acknowledgement by the Minister that this recommendation needs to be
seriously considered (Holst, Personal communication, October, 2012).
It is only with this sort of representation that seemingly minor issues and costs, but issues
which may be critical to the health and well-being of people with a particular disability, can
be guaranteed consideration and inclusion in a developing policy (e.g. the electricity costs
necessary for maintenance of household temperatures for some people with Multiple
Sclerosis). Andrew Baker (2012) reminds us that the failure to address these types of
occasional individual needs may result in ‘the lack of adequate funding undermining public
confidence in the scheme’.
Recruiting, retaining and training adequate numbers of support staff:
Even in the period of predominantly institutional care for people with disabilities more than
50 years ago, the recruitment, retention and training of support staff was an on-going issue
of concern. In more recent times, the increasing number of aged people in our community,
and these aged people also suffering increased levels of disability, has raised major concerns
about how we will provide the on-going care and support staff needed for people with
disabilities (AIHW, 2007).
During the past 20 years in particular, the number of younger people with more severe
disabilities and complex behaviour problems being placed into community residences has
also increased dramatically. Consequently, a far wider range of skills have been expected of
all people providing support services. This higher level of skills will require on-going cost
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increases in the training provided to doctors, especially GPs, nurses and support staff
(Dempsey & Nankervis, 2006).
These initial increased training costs may well result in significant future cost savings. Simple
changes to current support procedures, such as the over prescription of drugs to control
behaviours and the introduction of early intervention programs, will save significant funds.
But failure to meet these recruitment and training costs and simply funding limited and
inferior support services ‘could lead to workforce shortages and consequently [an]
inadequate supply of support services’ (Baker A., November 15, 2012).
Linkage to existing programs:
For many years state governments of all persuasions have attempted to save money by
simply moving the responsibilities for the support of a person with a disability from one
government department to another. In SA, people with dual disability (ie. physical or
intellectual disability combined with mental health problems) have regularly been passed
back and forth between the departments of disability and health. Rather than helping the
person with a disability, this process simply leads to the wasting of finances, resources and
time in both departments because of the constant duplication and repetition of services.
To minimise this type of wastage and the over-bureaucratisation of the scheme, the current
planning for the NDIS must ensure that efficient and appropriate use is made of already
existing personnel, expertise and resources available in all apropriate government services.
Possible funding options:
A Medicare type levy:
Although a Medicare type levy was the original suggested method of funding the NDIS, it
seems that the current parliamentary vitriolic focus on personalities and blame rather than
policy and progress by the major parties in Canberra has ruled out this option. As stated
earlier, the Gillard government seems afraid to even canvas this option because they know
it will be simply be described as yet another ‘great big tax’ by the opposition.
The current Medicare levy is not perfect but it is seen as one of the better solutions to
provision of affordable healthcare to a population in current world practice. It is certainly
better to live in Australia than the United States if you are both poor and sick.
The levy option does at least offer sufficient funding for the NDIS to fully succeed with those
funds coming as a small percentage of each citizen’s income. And we all need to remember
that, whatever their income level, any citizen, or any member of their family, can develop a
disability from age, illness or accident at any stage in their life.
Budget cuts to current programs:
The NDIS seemed to be the reform that almost every Australian wanted but there appear to
be insufficient funds for the federal government to meet the full costs of the scheme. ‘The
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reason [the government] doesn’t have any money left for people who really need it is that it
already gave most of it away to people who didn’t need it’ (Wilkinson, July 31, 2012).
Removing the $2.1 billion Schoolkids bonus, the increase of $1.8 billion in Family Tax Benefit
Part A, the $1.1 billion in carbon tax supplements and reducing the expenditure on the
National Broadband Network would just about provide sufficient funds for the NDIS. While
these payments are ‘certainly a help to many people, ... they are broad-based, largely nonmeans-tested subsidies and represent in many cases a very marginal benefit to most
recipients’ (Wilkinson, July 31, 2012). And for any government, to actually dare to make these
cuts now would make the 2013 election un-winnable.
Self-funded super:
The tax concessions provided for the super funds of the wealthy have been described as a
rort (Ingles, March 9, 2009). These tax concessions:

give you nothing if you earn below $35,000 per annum [but] $2,205 if you earn
$100,000 ... [and] even more if you make more than the minimum superannuation
contribution;

converts a progressive income tax system into a flat 15 percent tax ... benefiting
those on higher taxes;

the top five percent of [earners] account for 37 percent of concessional contributions;
and

provide little or no benefits to low-income earners including women working parttime.
(Ingles, March 9, 2009).
Recent studies have shown even further inequities in the system. People who care for their
children or parents, especially those with disabilities, receive effectively zero benefits. The
arguments that self-funded retirees reduce pressure on the aged pension budget are flawed
because there is ‘no such thing as “the age pension budget”’. And ‘Treasury forecasts
suggest that the cost of super tax concessions will grow faster than any other area of
government policy’ (Denniss, October 4, 2012).
Over the next three years the cost of taxpayers’ contribution to the retirement incomes
of the wealthier half of the population will increase from $30 billion per year to $45
billion per year.
(Denniss, October 4, 2012)
By legislating to prevent even just this coming increase, the government could use the saved
$15 billion to fund the NDIS. As Denniss (2012) says, ‘either the spendthrift left or the fiscal
conservatives on the right will have to start paying attention to it soon’.
Conclusions:
Around the world, there is a growing disillusionment with governments, parliaments and
politicians. Electors no longer accept the view that the only things that matter are the
economy and the result of the next election. Issues such as climate change, renewable
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energy sources and increasing displacement and growth in the number of people seeking
refugee status will not simply go away.
In Australia right now, the problems facing people with disabilities will not go away either.
With our aging population and the consequent reduction in the available workforce, the
number of people with disabilities and the difficulty in finding staff to support them will
simply continue to grow (AIHW, 2012). And all political parties must remember that currently
‘the replacement value of informal care for the disability sector – provided by families of the
shadow care economy – is $30.5 billion annually’. Over the next few years, that aging group
of parents who can no longer cope will need to give up their children ‘to expensive tax-payer
funded care’ and the funding required will simply go on increasing (Manne, August, 2011).
Another problem for government and political parties of all persuasions is that the disability
sector has started to believe that the misunderstandings and the unreasonable
discrimination heaped upon them and their families can be changed. The discussion of an
NDIS which respects the needs, the human rights, the dignity and the choices of people with
a disability has fired up the disability sector. Many people are now convinced that the
sympathetic but patronising and ‘unthink[ing] portrayal [of] those with a disability as a
terrible burden’ (Manne, August, 2011) must cease. These people have begun to support each
other and work together to achieve that goal. And the 20% of Australia’s population who
have direct involvement with people with disabilities have finally realised that the basic
human rights of all people can and must be recognised.
It is clear that the funding of an NDIS is a decision currently based on purely political
arguments rather than any commitment to basic human rights and respect for the dignity
and needs of people with a disability. But all major political parties must accept that the
provision of funds to allow the development of an efficient and effective NDIS is a policy
decision they will have to make in the near future. To provide those funds, Julia Gillard or
Tony Abbott (or those who replace them) will have to choose one of the options proposed
above or something at least very similar. And none of the available options will be popular
with all Australian electors.
Which option should our politicians choose?
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References:
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Approved:
7th February, 2013
Review Date:
February, 2016
d4d Board
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