Understanding demand to prevent market failures in the NDIS

By Flavio Souza

May 6, 2019

The National Disability Insurance Scheme (NDIS) is an ambitious welfare program. It incorporates many progressive themes that have been gaining global traction in policy making, whilst aiming to consolidate a previously fragmented and under-serviced Australian disability sector.

The innovative scheme puts choice at the hands of consumers, who are now free to expend their personalised budgets and choose amongst the support services available in the market.

To promote the success of the scheme, the National Disability Insurance Agency (NDIA) was established to steward the market forces in the sector — balancing the demand for disability-related services and the supply of supports, services, therapies and interventions across Australia.

But how can the NDIA help service providers make informed business choices, and stimulate their participation in the scheme, when real market data on demand is unavailable for this newly-forming disability sector?

The nature of the demand for NDIS services

There is urgency in understanding the demand for services in the NDIS.

First, in creating a nation-wide program that personalises support to 460,000 eligible participants, the scheme risks entrenching inequities.1 For example, urban, rural and remote area dwellers will likely benefit differently given the availability of service providers. Additionally, evidence exists that personalisation works better for people with physical disabilities.

Second, the NDIS promotes service quality through competition amongst service providers2, an approach that puts choices at the hands of consumers. Service providers must tailor their services in this consumer-centric paradigm and use marketing mix tools to ensure their survival in this new market. This is particularly relevant once the scheme is fully rolled out and prices become deregulated. Waiting for real market data in this changing landscape may leave providers scrambling in the dark. It seems crucial to support informed decision making by managers during this transition.

Thirdly, despite the need to orchestrate supply and demand, there is evidence that service providers are opting not to engage with the NDIS, delaying (or refraining!) their registration in the scheme.3 Currently, the agency funds services both from registered and unregistered providers. But given the additional hurdles (including costs) imposed by NDIS registration, it is important for providers to make informed business choices that can account for the benefits of this choice setting. For example, it would be useful for service providers to know whether (and how much more) participants are willing to pay for services from a registered provider.

Finally, the scheme aims to fund the personal goals and aspirations of participants rather than allocate disability-specific budgets. This shift emphasises the need to understand how decision makers align personal goals and aspirations to the available services, supports, therapies and interventions. For example, participants may choose to hire developmental educators, support workers, teachers or social workers when intending to find or keep a job. For providers, this generates uncertainty in comparison to block-funding programs that allowed them to estimate their revenue stream in advance. Importantly, the existing data on disability-services demand may only serve as a proxy to understand this new market.

The frontier approach to understanding demand

We propose more can be done to support service providers in the NDIS. Rather than the top-down scheme, we propose using the frontier research approaches to understand demand in the disability sector from the bottom-up, even as rollout is still underway.

Addressing the need for an evidence-based understanding of demand in the disability sector, a first-large scale study was conducted by the Institute for Choice, Capital Markets Cooperative Research Centre and National Disability Services.

The project reconciled concepts, methods (like a discrete choice experiment) and approaches (from consumer behaviour to choice modelling) to investigate demand given current NDIS parameters. Further, we pushed beyond current scheme definitions, examining how changes in quality aspects and service prices impacted consumer choice, for example. This allowed us to forecast demand considering potential changes in the NDIS and its yet-to-exist markets.

Insights on disability service demand are valuable to service providers in two ways.

First, it helps managers tailor their business resources to aspects that are favoured by costumers during the rollout of the scheme. For example, we asked participants to make choices between different service providers that varied with regards to quality descriptors, appointment variables, accessibility aspects and costs. Such findings allow providers to make informed decisions on whether they should invest, for example, in building accessibility or a new online booking system, given market demand in different location across Australia.

According to our data, there is a demand for better quality services — with two of the top-three more highly valued aspects referring to quality descriptors. Participants were more likely to choose providers with 5-star rating on customer reviews (and willing to pay on average $80.91 more per hour of service against their NDIS packaged compared to a competitor with a 1-star rating), experience with their disability type ($61.89 versus another without experience) and availability for immediate booking ($27.65 on average versus waiting up to two months for an appointment).

Second, insights on market demand can help managers prepare for price deregulation of services in the scheme. As with the pricing for service descriptors, we extrapolate the current cost structure of the scheme to investigate how the different types of services are valued by participants when required.

Participants are willing to pay for quality

Our data shows that participants are willing to pay more for certain categories of services. For example, when required, participants were willing to pay an additional $54.92 for supports toward changing harmful or concerning behaviours. This could reflect the level of individualised support expected for this kind of service (and associated additional cost), for example. Supports for fund management of disability support ($40.65) and therapy to help physical, mental and social needs ($38.66) were the second and third more valued types of services, respectively.

These insights highlight the potential of using innovative approaches to prevent market failures in the NDIS. Our pilot investigation shows that more can be done to provide actionable insights in helping service providers understand what is valued by customers, why it is valued, how best to improve service offerings and how much to charge for them.

We believe more can be done to ensure the scheme works not only for consumers but also for providers. For example, whereas registration in the NDIS is the responsibility of the NDIS Commission, service pricing is set by the agency. Perhaps a more provider-centric NDIS would facilitate provider engagement through subsidising registration though cost alleviation, for example.

We know that many service providers engage with the disability sector with a sense of purpose and moral obligation. As the scheme grows and continues to roll out across the country, however, service providers are continually having to worry about trying to work within its parameters. We believe that to avoid the risks of market failure, it is important for the scheme to work for service providers — giving them the input they need to continue focusing on what brought them to the sector in the first place.


  1. Carey, G., Malbon, E., Reeders, D., Kavanagh, A., Llewellyn, G. (2017) Redressing or entrenching social and health inequities through policy implementation? Examining personalised budgets through the Australian National Disability Insurance Scheme, International Journal for Equity in Health. 16:192.
  2. Green, C., Malbon, E., Carey, G., Dickinson, H., Reeders, D. (2018) Competition and collaboration between service providers in the NDIS, Centre for Social Impact, UNSW Sydney.
  3. Michael, L. (2018) New report highlights NDIS gaps for people with severe mental illness, Pro Bono Australia. Available at: https://probonoaustralia.com.au/news/2018/01/new-report-highlights-ndis-gaps-people-severe-mental-illness/. Accessed on 31 January 2018

Flavio Souza is a consultant at BIS Oxford Economics and an adjunct research fellow at the University of South Australia School of Commerce.

About the author
Inline Feedbacks
View all comments
The Mandarin Premium

Canberra’s changed

Stay on top for only $5 a week


Get Premium Today