News 26 April 2014

Disability scheme supports everyone

“EVERY Australian counts” is the catchcry that has united the disability sector, galvanised the nation to support an increase in the Medicare levy and won multi-partisan political support for the National Disability Insurance Scheme.

Bruce Bonyhady

For the first 30 years of my life, I mistakenly thought “every Australian counts” was a statement of fact. But from the time, nearly 30 years ago, that my eldest son was born with cerebral palsy, I have seen people with disability do not count. In those days, most Australians with disability were shut into Dickensian institutions. Invisible. Now they are largely shut out from an ordinary life, supported only by loving but increasingly exhausted and isolated families.

Today, the NDIS stands as a beacon of hope for the hundreds of thousands of people with severe disabilities and their immediate family members.

For them and future generations, the NDIS is a once-in-a-lifetime opportunity that must succeed.

For the nation, grappling with a multitude of not just immediate but intergenerational economic challenges, the NDIS is also imperative because disability policy has been as much an economic as a social policy failure.

For the board of the National Disability Insurance Agency and me personally, the focus is on ensuring the scheme is governed and managed well, in accordance with the NDIS Act.

These objectives are reflected in the agency’s first strategic plan, which prioritises sustainability, maintaining the confidence of all stakeholders and setting out a vision of maximising social and economic independence of disabled Australians.

But today, just nine months into an early implementation phase that everyone knew would be complex and require adjustments and refinements, the naysayers are having a field day.

Yet while our democracy should be a contest of ideas and competing priorities, what I want to bring to this contest is some much overlooked facts: accurate and evidence-based counting.

It is the kind of counting the Productivity Commission does better, more independently and more rigorously than any other organisation in Australia.

And what the Productivity Commission concluded, in 2011, was that the NDIS was an economic imper­ative and core government ­business; an exemplar of governments doing what people cannot do for themselves. In other words, the NDIS aligns perfectly with the ­approach to fiscal policy that Joe Hockey is championing, a point made on numerous occasions by Disabilities Minister Mitch Fifield.

The commission further declared, unequivocally, that the NDIS was the most efficient and cost-effective response — indeed, the only viable long-term response — to state and federal disability systems in crisis.

Since the early 1990s, spending on disability by all governments has risen at 7 per cent to 8 per cent a year in real terms — that is, after the annual cost of inflation — largely because life expectancy of people with disability continues to rise faster than the population as a whole.

Most people with disability are now outliving their parents, and there is less capacity for informal care because of dramatic changes to family structures. Families are generally smaller and more dispersed, with both parents wanting, or needing, to work.

The cost of these demographic changes has been compounded by a failure to invest in disabled Australians and a welfare approach that discouraged people from becoming as independent as possible.

The simple, hard-nosed truth is this: dependency is expensive, independence is not.

At the same time, independence and self-sufficiency is the basis of a quality life; unnecessary dependence and being an object of charity and pity is not.

Something had to change.

In 2011, after conducting the largest inquiry into any subject in its history, the commission labelled existing disability support systems “unfair, fragmented, underfunded and inefficient” and stated “from an economic perspective, the benefits of the NDIS will exceed the costs”.

Ultimately, the commission said, the NDIS would add 1 per cent to Australia’s gross domestic product by encouraging people with disability and their families to enter the workforce for the first time, or return to work.

It will help to correct Australia’s appalling record, which sees us ranked last among OECD countries in terms of people with disability living at or below the poverty line, and in the bottom third in employment rates.

Tens of thousands of new jobs will be created, directly and indirectly, spanning the country and covering diverse fields including allied health, finance, community engagement and ­administration.

Next week the national office of the National Disability Insurance Agency will open in Geelong, contributing directly to that city’s renewal and employment regeneration as old industries fade.

The scheme will also encourage innovation, new ways of doing disability business and new players servicing new markets.

Under the old system of rationed supply, thousands of disability service providers relied on block funding from government, spread thinly and inefficiently across under-resourced clients and unmet need. While there were pockets of innovation and best practice, the provider sector was constrained by red tape and burdensome regulation, and filled with disincentives to respond flexibly to individual need.

In short, the supply side of the market remained largely unresponsive and unchanged for decades. But with the dawn of the NDIS, those days are gone. It will take time to mature, but change and innovation are now starting to course through the provider sector, with new models of support being developed.

The scheme design encour­ages providers to become more ­efficient and innovative because disabled Australians, for the first time, have greater flexibility, choice and control over the support they receive and the providers engaged. They are becoming better informed consumers making individual choices, rather than passive recipients of a mass-market, one-size-fits-all welfare approach.

In assessing the long-term benefits to government budgets and hence all taxpayers, Price­waterhouseCoopers found that by about 2025, the cost of doing nothing would exceed the cost of the NDIS. By 2035, the cost of disability services without reform would be about $20 billion more, in real terms, than the NDIS.

Put simply, to do nothing will cost Australians billions of dollars extra and will not deliver any economic or social benefits. We would be stuck with the same fractured, dysfunctional system, but be paying more.

With all taxpayers contributing to funding the NDIS when the Medicare levy increases by 0.5 per cent from July 1 this year, together as a nation we will pool our resources efficiently to cover a hitherto uninsurable risk.

Suggestions the private market would or could underwrite this risk are a myth.

A key element of the insurance principle of the NDIS is that the scheme will minimise the costs of support and maximise opportunities over participants’ lifetimes, by investing in evidence-based early intervention, therapy and other supports.

Unlike previous systems, the NDIS does not discriminate based on cause or type of disability, or on where or how a disability occurred. Need determines support. This principal of equity is at the heart of the NDIS.

But it is vital that, in putting all this into practice, the NDIA gets it right so the NDIS is built to last.

This is why the scheme is being trialled in sites across the country so lessons learned can be incorporated in the full scheme rollout, when an estimated 460,000 Australians will benefit.

The exact timing of the rollout is the subject of a KPMG report, commissioned by the NDIS board.

The report, to be delivered mid-year, will recommend the optimal timetable to ensure the NDIS is sustainable and allow time for factors outside the control of the NDIA such as supply-side changes in the market to match the growth in demand.

At the same time, the agency has a big internal task. Administration of the scheme must be kept as lean as possible because the last thing taxpayers need is more bureaucracy than is essential to get the job done.

At full rollout, it is expected that less than 10 per cent of NDIS costs will be spent on administration, which would be best practice for an insurance company, that more than 85 per cent of NDIA staff will be dealing directly with clients and all the funds allocated to individuals will be contestable in a new and vibrant disability marketplace.

To ensure the scheme is well managed and the agency is equipped to meet the challenges ahead, the board commissioned a capability review last December, just six weeks after receiving its first quarterly report.

This review, which represents best-practice corporate governance and was publicly released as part of the board’s commitment to transparency, found getting the NDIS up and running was an enormous achievement. Never before has such a major policy reform had such a smooth start.

But perhaps the most memorable part of the report — certainly the part that got most media attention — was the analogy of the NDIS to a plane being built mid-flight. However, have you ever heard of a plane being tested without it being required to fly?

The NDIS is the Snowy Mountains Scheme of economic and social policy and, like the Snowy Scheme, it will take years to build and get right.

Everyone accepts that it takes years to build dams, tunnels or roads, yet when it comes to human services, which are at least as complex, there is an expectation that it can all be done overnight. The reality of the NDIS, however, is that the prudential governance cycle that lies at the centre of its operations means improvements will continue throughout the trial phase and beyond.

To get a sense of the scale of the NDIS, it is already larger than Victoria’s Transport Accident Commission, which has been operating for nearly 30 years. Yet the NDIS is as yet a little more than 1 per cent of its ultimate size.

This is a nation-building reform and, like all nation-building reforms, it must address myriad challenges in delivering the legacy reform of this generation successfully.

To date the scheme is on track and, contrary to some media reports, there is no cost blowout. Thanks to operational changes introduced as part of management’s continuous learning and improvement process, early teething problems with participant take-on have been overcome.

In the NDIS, the key cost drivers are eligibility, scope of supports, price, volume of supports, how supports are delivered and use of support packages.

The first three of these drivers have been holding well from the scheme’s outset, and further operational modifications are now under way.

For example, the way supports are structured is being changed to a more flexible approach than initially, thereby providing participants with much more control and choice while driving innovation and efficiency.

At the heart of the NDIS, which has its origins in accident compensation, is a strong quantitative link between assessment and support needs.

In accident compensation schemes, there are three types of catastrophic injury: spinal cord, brain and burn injuries, and the linkages between injury, functional impairment and support needs are well developed.

The NDIS is building this same model for the functional impairments that arise from autism, cerebral palsy, motor neurone disease and all the other disability types that lead to significant disability and, necessarily, the data that is being collected is essential to the establishment of these links.

Hence, this particular plane has to fly while it is being built, because the data now being fed back from all the monitors in the plane is essential to its full design.

It is also essential to recognise that the cost distribution of people expected to enter the NDIS is very skewed: only 10 per cent of participants are expected to be in the two highest support categories, but they are expected to represent 42 per cent of the costs, while 55 per cent of participants are expected to be in the lowest three support categories and represent only 12 per cent of full scheme costs.

So far, fewer low-cost participants have entered the scheme than expected, and if this is confirmed when statistically significant data is available later this year as the rollout of the scheme is complete in the Barwon, Victoria, and Newcastle, NSW, areas, average package costs will turn out to be higher than originally estimated while total costs will remain within the original total funding estimates.

And total costs — which also take account of use of packages and is usually about 90 per cent in accident compensation schemes — are the better measure of longer-term costs and sustainability than average package costs.

There is additional major work being undertaken on a wide set of policy issues such as the interfaces between the NDIS and health, education and housing, and ensuring that those not eligible for an individual package still have their needs met.

However, most crucially, the NDIS is already seeing thousands of lives changed for the better.

Last Australia Day, as an Australia Day ambassador, I spoke at an event at Torquay, south of Geelong. One of the other speakers, barely holding back his tears, told me his wife had multiple sclerosis and the NDIS was enabling him to continue working rather than being her full-time carer.

Shahni Moore, from Maitland, NSW, acquired her disability in Victoria when she was flung from her bicycle into a power pole. Under Victorian law, Shahni would have been eligible for ­financial help if her bicycle had hit a car instead — but only if that car had Victorian numberplates.

“I would be living a very different and financially comfortable life if I’d a hit a car instead,” Shahni said.

“But because I hit a power pole I was stuck in a grey area where no one would pick up the bill to provide the support and services I needed. It made me feel like I didn’t matter.”

The NDIS is making Shahni and many others count. And it is doing so in a way that will inject more jobs, growth and human potential into our economy.

The NDIS should continue to be debated and tested, but no more or less than existing government policies, and that debate should be based on evidence.

Now is a time for visionary leadership, great courage and resolve.

And, on behalf of the board, management and staff of the NDIA, I guarantee that we are committed to building the NDIS to last; for future as well as present generations.

Bruce Bonyhady, a former fund manager, is inaugural chairman of the National Disability Insurance Agency. He has two sons with disability.

For the first 30 years of my life, I mistakenly thought “every Australian counts” was a statement of fact. But from the time, nearly 30 years ago, that my eldest son was born with cerebral palsy, I have seen people with disability do not count. In those days, most Australians with disability were shut into Dickensian institutions. Invisible. Now they are largely shut out from an ordinary life, supported only by loving but increasingly exhausted and isolated families.

Today, the NDIS stands as a beacon of hope for the hundreds of thousands of people with severe disabilities and their immediate family members.

For them and future generations, the NDIS is a once-in-a-lifetime opportunity that must succeed.

For the nation, grappling with a multitude of not just immediate but intergenerational economic challenges, the NDIS is also imperative because disability policy has been as much an economic as a social policy failure.

For the board of the National Disability Insurance Agency and me personally, the focus is on ensuring the scheme is governed and managed well, in accordance with the NDIS Act.

These objectives are reflected in the agency’s first strategic plan, which prioritises sustainability, maintaining the confidence of all stakeholders and setting out a vision of maximising social and economic independence of disabled Australians.

But today, just nine months into an early implementation phase that everyone knew would be complex and require adjustments and refinements, the naysayers are having a field day.

Yet while our democracy should be a contest of ideas and competing priorities, what I want to bring to this contest is some much overlooked facts: accurate and evidence-based counting.

It is the kind of counting the Productivity Commission does better, more independently and more rigorously than any other organisation in Australia.

And what the Productivity Commission concluded, in 2011, was that the NDIS was an economic imper­ative and core government ­business; an exemplar of governments doing what people cannot do for themselves. In other words, the NDIS aligns perfectly with the ­approach to fiscal policy that Joe Hockey is championing, a point made on numerous occasions by Disabilities Minister Mitch Fifield.

The commission further declared, unequivocally, that the NDIS was the most efficient and cost-effective response — indeed, the only viable long-term response — to state and federal disability systems in crisis.

Since the early 1990s, spending on disability by all governments has risen at 7 per cent to 8 per cent a year in real terms — that is, after the annual cost of inflation — largely because life expectancy of people with disability continues to rise faster than the population as a whole.

Most people with disability are now outliving their parents, and there is less capacity for informal care because of dramatic changes to family structures. Families are generally smaller and more dispersed, with both parents wanting, or needing, to work.

The cost of these demographic changes has been compounded by a failure to invest in disabled Australians and a welfare approach that discouraged people from becoming as independent as possible.

The simple, hard-nosed truth is this: dependency is expensive, independence is not.

At the same time, independence and self-sufficiency is the basis of a quality life; unnecessary dependence and being an object of charity and pity is not.

Something had to change.

In 2011, after conducting the largest inquiry into any subject in its history, the commission labelled existing disability support systems “unfair, fragmented, underfunded and inefficient” and stated “from an economic perspective, the benefits of the NDIS will exceed the costs”.

Ultimately, the commission said, the NDIS would add 1 per cent to Australia’s gross domestic product by encouraging people with disability and their families to enter the workforce for the first time, or return to work.

It will help to correct Australia’s appalling record, which sees us ranked last among OECD countries in terms of people with disability living at or below the poverty line, and in the bottom third in employment rates.

Tens of thousands of new jobs will be created, directly and indirectly, spanning the country and covering diverse fields including allied health, finance, community engagement and ­administration.

Next week the national office of the National Disability Insurance Agency will open in Geelong, contributing directly to that city’s renewal and employment regeneration as old industries fade.

The scheme will also encourage innovation, new ways of doing disability business and new players servicing new markets.

Under the old system of rationed supply, thousands of disability service providers relied on block funding from government, spread thinly and inefficiently across under-resourced clients and unmet need. While there were pockets of innovation and best practice, the provider sector was constrained by red tape and burdensome regulation, and filled with disincentives to respond flexibly to individual need.

In short, the supply side of the market remained largely unresponsive and unchanged for decades. But with the dawn of the NDIS, those days are gone. It will take time to mature, but change and innovation are now starting to course through the provider sector, with new models of support being developed.

The scheme design encour­ages providers to become more ­efficient and innovative because disabled Australians, for the first time, have greater flexibility, choice and control over the support they receive and the providers engaged. They are becoming better informed consumers making individual choices, rather than passive recipients of a mass-market, one-size-fits-all welfare approach.

In assessing the long-term benefits to government budgets and hence all taxpayers, Price­waterhouseCoopers found that by about 2025, the cost of doing nothing would exceed the cost of the NDIS. By 2035, the cost of disability services without reform would be about $20 billion more, in real terms, than the NDIS.

Put simply, to do nothing will cost Australians billions of dollars extra and will not deliver any economic or social benefits. We would be stuck with the same fractured, dysfunctional system, but be paying more.

With all taxpayers contributing to funding the NDIS when the Medicare levy increases by 0.5 per cent from July 1 this year, together as a nation we will pool our resources efficiently to cover a hitherto uninsurable risk.

Suggestions the private market would or could underwrite this risk are a myth.

A key element of the insurance principle of the NDIS is that the scheme will minimise the costs of support and maximise opportunities over participants’ lifetimes, by investing in evidence-based early intervention, therapy and other supports.

Unlike previous systems, the NDIS does not discriminate based on cause or type of disability, or on where or how a disability occurred. Need determines support. This principal of equity is at the heart of the NDIS.

But it is vital that, in putting all this into practice, the NDIA gets it right so the NDIS is built to last.

This is why the scheme is being trialled in sites across the country so lessons learned can be incorporated in the full scheme rollout, when an estimated 460,000 Australians will benefit.

The exact timing of the rollout is the subject of a KPMG report, commissioned by the NDIS board.

The report, to be delivered mid-year, will recommend the optimal timetable to ensure the NDIS is sustainable and allow time for factors outside the control of the NDIA such as supply-side changes in the market to match the growth in demand.

At the same time, the agency has a big internal task. Administration of the scheme must be kept as lean as possible because the last thing taxpayers need is more bureaucracy than is essential to get the job done.

At full rollout, it is expected that less than 10 per cent of NDIS costs will be spent on administration, which would be best practice for an insurance company, that more than 85 per cent of NDIA staff will be dealing directly with clients and all the funds allocated to individuals will be contestable in a new and vibrant disability marketplace.

To ensure the scheme is well managed and the agency is equipped to meet the challenges ahead, the board commissioned a capability review last December, just six weeks after receiving its first quarterly report.

This review, which represents best-practice corporate governance and was publicly released as part of the board’s commitment to transparency, found getting the NDIS up and running was an enormous achievement. Never before has such a major policy reform had such a smooth start.

But perhaps the most memorable part of the report — certainly the part that got most media attention — was the analogy of the NDIS to a plane being built mid-flight. However, have you ever heard of a plane being tested without it being required to fly?

The NDIS is the Snowy Mountains Scheme of economic and social policy and, like the Snowy Scheme, it will take years to build and get right.

Everyone accepts that it takes years to build dams, tunnels or roads, yet when it comes to human services, which are at least as complex, there is an expectation that it can all be done overnight. The reality of the NDIS, however, is that the prudential governance cycle that lies at the centre of its operations means improvements will continue throughout the trial phase and beyond.

To get a sense of the scale of the NDIS, it is already larger than Victoria’s Transport Accident Commission, which has been operating for nearly 30 years. Yet the NDIS is as yet a little more than 1 per cent of its ultimate size.

This is a nation-building reform and, like all nation-building reforms, it must address myriad challenges in delivering the legacy reform of this generation successfully.

To date the scheme is on track and, contrary to some media reports, there is no cost blowout. Thanks to operational changes introduced as part of management’s continuous learning and improvement process, early teething problems with participant take-on have been overcome.

In the NDIS, the key cost drivers are eligibility, scope of supports, price, volume of supports, how supports are delivered and use of support packages.

The first three of these drivers have been holding well from the scheme’s outset, and further operational modifications are now under way.

For example, the way supports are structured is being changed to a more flexible approach than initially, thereby providing participants with much more control and choice while driving innovation and efficiency.

At the heart of the NDIS, which has its origins in accident compensation, is a strong quantitative link between assessment and support needs.

In accident compensation schemes, there are three types of catastrophic injury: spinal cord, brain and burn injuries, and the linkages between injury, functional impairment and support needs are well developed.

The NDIS is building this same model for the functional impairments that arise from autism, cerebral palsy, motor neurone disease and all the other disability types that lead to significant disability and, necessarily, the data that is being collected is essential to the establishment of these links.

Hence, this particular plane has to fly while it is being built, because the data now being fed back from all the monitors in the plane is essential to its full design.

It is also essential to recognise that the cost distribution of people expected to enter the NDIS is very skewed: only 10 per cent of participants are expected to be in the two highest support categories, but they are expected to represent 42 per cent of the costs, while 55 per cent of participants are expected to be in the lowest three support categories and represent only 12 per cent of full scheme costs.

So far, fewer low-cost participants have entered the scheme than expected, and if this is confirmed when statistically significant data is available later this year as the rollout of the scheme is complete in the Barwon, Victoria, and Newcastle, NSW, areas, average package costs will turn out to be higher than originally estimated while total costs will remain within the original total funding estimates.

And total costs — which also take account of use of packages and is usually about 90 per cent in accident compensation schemes — are the better measure of longer-term costs and sustainability than average package costs.

There is additional major work being undertaken on a wide set of policy issues such as the interfaces between the NDIS and health, education and housing, and ensuring that those not eligible for an individual package still have their needs met.

However, most crucially, the NDIS is already seeing thousands of lives changed for the better.

Last Australia Day, as an Australia Day ambassador, I spoke at an event at Torquay, south of Geelong. One of the other speakers, barely holding back his tears, told me his wife had multiple sclerosis and the NDIS was enabling him to continue working rather than being her full-time carer.

Shahni Moore, from Maitland, NSW, acquired her disability in Victoria when she was flung from her bicycle into a power pole. Under Victorian law, Shahni would have been eligible for ­financial help if her bicycle had hit a car instead — but only if that car had Victorian numberplates.

“I would be living a very different and financially comfortable life if I’d a hit a car instead,” Shahni said.

“But because I hit a power pole I was stuck in a grey area where no one would pick up the bill to provide the support and services I needed. It made me feel like I didn’t matter.”

The NDIS is making Shahni and many others count. And it is doing so in a way that will inject more jobs, growth and human potential into our economy.

The NDIS should continue to be debated and tested, but no more or less than existing government policies, and that debate should be based on evidence.

Now is a time for visionary leadership, great courage and resolve.

And, on behalf of the board, management and staff of the NDIA, I guarantee that we are committed to building the NDIS to last; for future as well as present generations.

Bruce Bonyhady, a former fund manager, is inaugural chairman of the National Disability Insurance Agency. He has two sons with disability.

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