1. Market challenges limit the ability of the NDIS to deliver quality supports for participants

The NDIS has transformed the way disability supports are delivered.

Shifting from a government, block-funded model to a market-based model with individualised funding has enabled NDIS participants to have choice and control over the providers they work with and, to the extent allowed within their individualised budgets, what supports they access.

With this shift in funding also came a significant increase in scale and diversity of demand for services. Significant market development has occurred – over 350,000 participants are now receiving disability supports for the first time^[1]. But this growth has not been sufficient to secure access to quality services across all participants, supports and locations.

Past reviews of the NDIS indicate a range of ongoing market challenges that reflect more than just transition issues (Figure 1).

Moving from block funding devolved responsibility for coordinating access to support from governments to individuals and the market. The shift relied on individual participants, their families and market intermediaries having the capacity and capability to do this in an already complex environment, with little (or at least unclear) protection for participants where markets fail.

For some NDIS supports, competition between multiple service providers have not been able to effectively ensure access to supports for participants. It has been difficult for participants to find and match with suitable service providers, and for providers to achieve economies of scale and to ensure continuity of supply for these supports.

Thin markets – where the number of providers or participants is too small to support the competitive provision of services, or to support any provision at all – have left some participants with limited, or no, access to supports or certain types of supports.

Under the current market-based approach, some mature participants are not accessing supports despite having the budget to do so. This is most stark in remote and very remote communities where over one in three mature participants – participants who have been in the NDIS for one or more years – are not accessing daily activity supports, and over one in four are not accessing therapy supports that assist with building skills and independence.

Markets for certain supports are also thin in non-remote areas, particularly for specialised services like behaviour supports and for First Nation participants to access culturally safe supports (Figure 1).

As far back as 2017, the Productivity Commission found thin markets have been, and will continue to be, a persistent feature of the disability support sector. And in the absence of government intervention there will be greater shortages, less competition, and ultimately poorer outcomes for participants^[2].

Figure 2 text description

What does this mean for governments as market stewards?

Governments’ stewardship role in the NDIS, and other social services (such as community housing services) is broad. They have a role in supporting informed participant choice, access to quality supports, ongoing service improvements, and ensuring appropriate safeguards are in place (Figure 3).

Even when using market-driven service delivery approaches, governments (as market stewards) retain responsibility for ensuring the NDIS, as a whole, delivers the intended outcomes for all participants.

As highlighted above, while the NDIS has improved outcomes for many participants, the rigidity in the current market approach is leaving others behind. Lack of clear roles and responsibilities across governments are also hindering coordination of market stewardship efforts^[5].

The NDIS is not one market, but a complex system of ‘sub-markets’. For the NDIS to deliver outcomes for participants, there is no one-size-fits-all approach to service delivery or market stewardship.

For each sub-market, market stewards need to design a service delivery approach that reflects the nature of NDIS participants, supports and providers (Figure 4).

Service delivery approaches may differ, for example, across:

• Assistive technology and other capital supports – these supports are often one-off in nature. Participants and regulators can more easily monitor and compare quality.
• Capacity building supports – these supports depend heavily on trusted relationships to be delivered. Providers are also likely to have opportunities to deliver in other sectors, such as health and aged care.
• Core supports – these supports (particularly for personal care) also depend heavily relationships, and support needs can vary across participants (for example, between children and adults). Typically these are ongoing and need to be delivered face-to-face. Often limited scope exists for multiple providers in remote contexts.
• Communities – Different communities may share different attitudes, beliefs and values. Trust, cultural safety and trauma-informed approaches will be critical for delivering quality and safe supports.

An understanding of participants, supports and providers can also help market stewards to consider which market-based tools – such as competition, and contestability – may drive the best outcomes for participants and governments (Figure 5).

Choice, competition and contestability in the NDIS

Choice and control has been foundational to the design of the NDIS. Informed choice empowers participants to have greater control over their lives.

When markets function well, competition between providers can offer more choice to participants, and help deliver more effective supports and better outcomes for NDIS participants. Participants can choose to leave poor performing providers who deliver low quality, low value or potentially unsafe services, and shift their funding to providers who deliver safe, high quality supports that are better value for money. In this way, competition in markets can help achieve the mix of supports and providers valued most by participants.

The first decade of the NDIS has been characterised by the assumption that, once mature, the market for disability services will function well. In practice, this has not happened for all participants and support types.

There are many reasons why a market may not work. Equally, there a lots of ways government can ‘intervene’ to improve how NDIS markets function and, ultimately, improve outcomes.

Market stewards can use a number of tools or ‘market mechanisms’ to underpin a competitive market approach. This includes market coordination and market setting arrangements (Figure 5). For example, price caps is a key market tools currently used by the NDIA in its market stewardship role.

Note: Adapted from the 2019 NDIS Thin Markets Project – Approach to Thin Markets Final Report^[6].

Figure 5 text description

However, competition between multiple service providers is not always possible. In these cases, contestable arrangements can be used to select providers (using ‘alternative commissioning’ arrangements) to improve the operation of the market and deliver better outcomes for participants.

A contestable market (including one with a single active provider) can help ensure providers are responsive to participants where there is a credible threat of replacement. Contestability can achieve many of the benefits of competition without experiencing the drawbacks when the conditions for strong competition are not met. Contestability can be applied at different levels in the market:

• at the ‘service level’ for a group of participants
• for a ‘bundle’ or ‘wrap around’ supports for an individual or group of participants
• at the ‘whole of market’ level for a community.

Using alternative commissioning – where a government or community assumes the role of the commissioner – does not necessarily equate to block funding. Rather, alternative commissioning can include a range of design choices, including place-based and community-driven approaches (Figure 5).