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Are the pricing and payment approaches in the NDIS market working?
The NDIS was set-up to give participants more power to choose who provides their supports and at what price.
Participants find and buy their NDIS supports from providers. We call this the ‘NDIS market’. Providers compete with each other to offer supports to participants. We call this ‘market competition’.
The NDIS market is not yet working for all participants
The current approach to the NDIS market relies too much on market competition. This is not always working the way we expected.
We’ve heard that:
- At times, too few providers have decided to offer NDIS supports. This makes it difficult for participants to find and access the supports.
- Participants do not have the information they need to help them decide what works for them.
- Many different people help participants find, coordinate and pay for their supports. But, what these people should do and how they work together is unclear.
How the NDIS market currently operates also means the goods and services providers want to deliver is not always the same as what would most benefit participants and governments.
Governments have a role in ensuring the NDIS market works for everyone
The NDIS market is not like other markets. Finding and buying NDIS supports is much different than going to the supermarket. And, the role of government in the NDIS market looks different.
Governments have a number of ways to manage the NDIS market. They can set different rules and procedures for how the market operates.
The main way the market is managed is by setting rules around how much and the way providers are paid. This includes ‘Price caps’ which are set by the government to say the maximum amount a provider can charge a participant.
Our findings
We have looked at pricing and payments approaches in the NDIS. Our findings provide some ideas on ways the current approaches can be changed to improve outcomes for participants and scheme sustainability.
There are opportunities to improve how we set prices
Most NDIS supports have a maximum price or price cap. From October to December 2022, about 80% of payments in the NDIS had a price cap.
Price caps aim to ensure providers do not drive up prices and that their services are value for money. However, the way price caps are set is creating issues in the NDIS market:
- The blunt way price caps are set is not helping providers respond to the needs of participants or encouraging innovation. We’ve heard from some providers this also makes it hard to invest in the capability of workers.
- While price caps are slightly higher for participants with complex needs, past reviews have heard that the current price caps don’t do a good job at supporting access for participants with complex needs.
We know that providers often charge participants at the maximum price. We also know participants may not change their provider when prices change. As such, there is little reason for providers to compete by lowering the price or improving the quality of supports.
NDIS providers get paid for each support they provide rather than for helping participants to achieve outcomes
For most NDIS supports, providers get paid for each support they provide. For example, they get paid a certain amount for an hour of support. We call this ‘fee-for-service’.
Fee-for-service is an easy way to pay providers.
However, it means providers benefit when they increase the number of supports to participants – even if these extra supports do not improve their outcomes. Providers may not benefit when they help a participant to be more independent and need less of their supports. This way of paying providers can place pressure on the total cost of the scheme.
There is a lack of clear information on quality and prices
Participants cannot easily access information on quality and prices. This makes it hard for participants to compare providers and make choices.
Governments also don’t have the information they need. They can’t see all transactions in the scheme. They don’t know if the supports being provided are working to help participants to reach their goals.
The rules for the NDIS market needs to be changed so that providers act in the best interest of participants and governments
Even with better information on price and quality, removing price caps at this point in time could place pressure on total scheme costs.
Even so, there are opportunities to improve the rules and procedures for how the NDIS market operates. These improvements should consider how to ensure the approach to delivery better reflects differences in the characteristics of participants, supports types and providers.