Actions government can take to address thin markets and market gaps in the NDIS

By Gemma Carey & Eleanor Malbon

Monday October 22, 2018

Social researchers Gemma Carey and Eleanor Malbon highlight how the NDIA can detect market deficiencies and what strategies it can use to address them.

Calls for management of the NDIS market are increasing rapidly as the scheme progresses.

There have been a number of high-profile calls for better market stewardship for the many NDIS markets and sub-markets nationally, most recently the market readiness report from the Joint-Standing Committee on the NDIS.

The committee recommends clarity of roles regarding market stewardship across the major agencies – the National Disability Insurance Agency and the Department of Social Services.

Meanwhile, documents released from the NDIA on market stewardship set out principles for stewardship, and goals of NDIS markets. For example, the Market Statement of Opportunity and Intent states that stewards should facilitate, monitor and observe and alter market rules.

There is an urgent need to go beyond principles and collate actual evidence of what governments and government agencies can do in practice to steward quasi markets such as the NDIS market.

Based on a systematic review of international literature on market stewardship interventions, our research identifies actions governments can take to address thin markets and market gaps.

For a comprehensive review of market interventions and their adaptation to the NDIS you can read our full report here.

The most effective interventions identified were:

  • Flexible pricing and price setting responsibilities

Price is one of the major levers for market stewardship in the NDIS.

The NDIS has a complicated system of price setting. Firstly, there are different pricing rules depending on the sort of budget administration that a participant undertakes. NDIS budgets can be administered by the participant (‘self-managed’), or be managed by the NDIS, or a combination of both (1). If a NDIS participant is ‘self-managed’ then they can negotiate prices directly with a service provider, using NDIA prices as a guide. When a participant’s budget is administered in conjunction with NDIA the prices are far less flexible and at times fixed (5).

The majority of participants are NDIA managed or co-managed (around 90%). This means that the majority of the NDIS quasi-market operates under fixed prices. These prices are set by the NDIS actuaries.

According to the NDIS Act (2013), expenditures must ‘represent value for money’ and the ‘long term sustainability of the scheme’. As recent research has pointed out, this means that “the NDIA is not authorised to set prices in response to market issues” such as gaps in care services. This is problematic, as in order for the NDIS to meet its policy goals, prices ought to be adjusted to reflect gaps in supply.

Many of the interventions identified in our review require flexible pricing arrangements that are responsive to local market conditions. The evidence also suggests that this should include devolving price setting responsibilities to those with more market intelligence (i.e. local level actors such as regional NDIA offices).  This would of course mean a major restructuring of pricing in the scheme and have to be managed carefully

  • Information sharing

Information sharing regarding supply and demand was found to be key to ensuring market effectiveness. At present, information shared by the NDIA is very limited.

The NDIA could release data or more detailed position statements on supply and demand at a local level across Australia (i.e. LGA level nationwide). This will enable service providers to position themselves to meet gaps in the market where service provision is dangerously low or absent.

There has been concern that such detailed market position statements will pave the way for ‘profiteering’ providers, so we recommend coupling detailed market position statements with powerful regulation over the quality of service provided through the NDIS Quality and Safeguard Commission.

  • Equity interventions

There has been growing concern about unequal access and benefit for NDIS participants that have complex needs or live in remote areas.

Actions taken to address equity internationally included:

  • Additional subsidies for vulnerable groups
  • Direct payments to particular geographical areas to build up staff and expertise through increased demand
  • Provider of last resort
  • Greater funding given to people in areas of more need

Is there capacity to act?

The actions identified in our review require significant capacity within the NDIA if they are to carry out this diverse array of market stewarding actions across the many markets and sub-markets nationally.

The actions identified in our review for good market management of quasi-markets require high levels of capacity for monitoring, quality and safeguarding and information sharing. However, a lack of capacity has been noted by several high-profile reviews of the NDIA, including the National Audit Office and the Joint Standing Committee.

This begs the worrying question about whether the NDIS currently has the capacity to steward the NDIS markets effectually to meet its goals of enabling people with permanent and significant disability to access necessary care Australia-wide. We recommend that the NDIS is given greater capacity to steward the NDIS markets, including greater resources and the removal of the staffing cap.

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