This opinion article by Jennifer Westacott, Chief Executive of the Business Council of Australia was published in The Australian on 7 March 2016.
As we head into another set of budget deliberations, we are again confronted with how on earth we redesign major and growing spending programs so that they are effective, economically sustainable and fit the purpose they were designed to serve.
With the deficit projected to balloon to over $300 billion this year and spending — if unchecked — expected to exceed revenue by 6 per cent of GDP by 2055, this kind of fundamental redesign is unavoidable.
But what the last five or six budgets have shown is how hard it is to correct the trajectory of major spending programs by retrofitting solutions and abruptly changing people’s entitlements. Worse, when we fail to design programs properly from the outset, we can find ourselves with no other choice but to make painful, politically uncomfortable corrections down the track which have very severe consequences for the people impacted by them.
The National Disability Insurance Scheme (NDIS) is a stand out example of where we must get it right from the outset to avoid having to harshly impact the most vulnerable people in the community.
When the NDIS was first proposed by the Productivity Commission, it received support right across the political spectrum and from most Australians. Support was so strong that for the most part Australians supported paying an additional levy to help fund the scheme. People were willing to do that, reflecting the egalitarian nature of our society and our belief in supporting the most vulnerable and disadvantaged, and the right of people with a disability to live in dignity.
The Business Council of Australia was unambiguously supportive of the need for such a scheme. We were also one of the groups that called for a thorough evaluation of the pilot program to provide a good, strong picture of how the system would work and what the long-run costs would look like.
But in an election year, politics took over and we have ended up racing to deliver a scheme and increasing the risk of unintended consequences. Over the next four years, more than 90 per cent of eligible participants will enter the scheme and its expenditure will increase twenty fold, from $1bn a year to around $20bn a year.
The question is how do we now continue to implement the scheme at this pace, without running the risk of costs getting out of control, threatening the security and sustainability of the scheme?
While governments should by no means stop the rollout, they should also not be afraid to acknowledge where risks in the scheme are materialising and go back to the first principles of design set out by theProductivity Commission and, if necessary change course and redesign.
The NDIS was proposed as an insurance scheme, to be underpinned by a fundamentally new model of delivering disability support, but there are three key risk areas that if left unchecked could undermine its success.
First, there is no clear and transparent spending envelope, to provide added impetus for cost discipline. This is particularly important in the early stages of a government scheme that is being quickly rolled out.
Secondly, in such an under developed market, we are also unlikely to see services delivered for best value. While there have been huge reforms in state service delivery, we still have very high cost, inefficient services and no clarity on how the NDIS is going to impact, and be impacted by, the service delivery challenges.
The National Disability Insurance Agency has conceded that market capacity will need to increase significantly as providers transition to the new model.
The third problem is that eligibility is still evolving, including major boundary issues with aged care and mental health. This has already occurred since the scheme’s original design, with psychosocial disabilities now included with increased funding attached. In South Australia, the number of children with autism in trials was higher than anticipated with the funding shortfall having to be made up.
Not all issues will be replicated across the national rollout, but experience to date is illustrative of the range of issues that could be encountered as the scheme is fully implemented.
I care deeply about this issue. One of my responsibilities as a state bureaucrat was overseeing disability services in NSW. I met with families struggling to pay for the services, the equipment, the care their children needed. I understand how hugely important this is — and this is why I believe we have to get it right. Because my fear is the community of people who now have expectations of the services that will be available will only be told two years down the track that those expectations cannot be met.
Given the particularly risky period of the NDIS rollout we are now entering, there are three key things that need to be done by the middle of 2016.
Firstly, release assessments of how the market is meeting demand in each region. This is necessary to highlight the gaps and risks in the disability support market, as well as providing important signals for investment and price competition by market providers. We don’t want a repeat of previous Vocational Education and Training sector reforms where poor information led to poor decisions and cost blow outs. We also need to ensure those at the frontline have the right incentives and tools to extract the best price and value from the market.
Second, publish an assessment of the challenges around eligibility and scope of assistance, particularly boundary issues with aged care and mental health, and then revise operational guidelines for the scheme in line with that assessment. In the meantime, there should be no expansion in the scheme’s design during this time — in terms of both eligibility and scope of services.
Third, explore options for a clear and transparent spending envelope for the NDIS, for inclusion in the 2016-17 budget across the forward estimates.
While there is a need for careful implementation, this also needs to be balanced against the need to get participants into one national scheme as quickly as possible. The longer we have both national and state and territory schemes in place, the greater the potential is for duplication, inefficiency, overlap and confusion.
Unlike so many other programs where we are having to retrofit solutions, with honesty and courage and integrity we can and must do this properly now. The alternative is to let costs balloon uncontrollably and face difficult decisions to ration services within the scheme, which would inflict hardship down the track on the most vulnerable in our society.