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Payment and pricing frameworks to improve incentives for the delivery of quality supports

NDIS markets are not like other markets. They are social markets. Finding and buying NDIS supports is different to going to the supermarket or choosing a service like an internet provider. This means the role of government in stewarding NDIS markets must also be different.

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There are opportunities to improve how price caps are set

Most NDIS supports have a maximum price or price cap. In 2022-23, around 83 per cent of payments were subject to a price cap.187 Price caps aim to prevent large providers from using their market power to drive up prices and help ensure services are value for money. However, the way price caps are set is creating issues in the NDIS market:

  • The blunt and non-transparent way price caps are set is not helping providers respond to the needs of participants or encouraging market confidence or 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. In the NDIA’s 2020-21 Financial Benchmarking Survey, over four in five providers (83 per cent) reported always setting prices at the price cap. A small share of providers (16 per cent) said that they ‘sometimes’ set prices below the price limit.188

We also heard from participants, families and carers that it is difficult to find supports that are below the price cap.

NDIA staff have a misinformed perception that participants (especially those who self-manage) hold significant power to negotiate with providers in relation to fees charged. Providers simply refuse to provide service and move on to the next participant.

- Carer189

Providers respond to incentives embedded within pricing and payment rules. For example, when participants purchase low cost assistive technology (that is, assistive technology under $1,500) they do not require a quote and only require written advice from an assistive technology advisor for ‘higher risk’ items. We see a spike in transactions at the $1,500 threshold. Between July 2020 and June 2023, 62 per cent more transactions were made just below the threshold - that is, between $1,401 and $1,500 - compared with transactions made between $1,301 and $1,400.190

We also know participants may not change their provider when prices change. So, there is little reason for providers to compete by lowering the price or improving the quality of supports.

We have heard from the sector about the National Disability Insurance Agency’s (NDIA) inherent conflict of interest in setting price caps when it is also responsible for the sustainability of the scheme. Providers have also long expressed concern about the lack of transparency in the way prices are set.

The current price setting mechanism, which is an annual review undertaken by the NDIA, is perceived as being a fast and incomplete review mechanism that does not fully utilise stakeholder feedback or undertake a full analysis of the factors that are currently influencing the NDIS market and delivery of NDIS services. There is also a perception that NDIA’s Annual Pricing Review is impacted by overall NDIA budget constraints in its final decision making. While budgetary impacts must be a key consideration, it should be transparently accounted for as an element of overall decision making, which does not occur currently.

- Occupational Therapy Australia191
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Providers are incentivised for quantity rather than quality

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 outcomes. Providers may not benefit when they help a participant to be more connected to community and need fewer supports. This way of paying providers can place pressure on the total cost of the scheme.

Currently providers are paid based on the services they provide, rather the benefits of those services to participants. Providers should be rewarded for helping to achieve participant goals. This would benefit the providers who provide high-quality services, and it increases the focus for Government, the NDIS and providers on building the long-term capabilities of participants.

- Get Skilled Access 191

Fee-for-service arrangements may also contribute to a lack of investment in provider and workforce capability and quality assurance. Where providers are incentivised to prioritise more services over and above quality assurance, people with disability bear the consequences. This includes funding consequences (through over-servicing) and safety and quality consequences (as providers are incentivised to limit resources).

- Women with Disabilities Australia 193
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