Submission 161 National Disability Insurance Agency (ndia) National Disability Insurance Scheme (ndis) Costs Commissioned study

Question 62

What are the major risks to the scheme’s financial sustainability? What insights do the experiences from the trial sites provide on potential risks in the context of financial sustainability? How might the NDIA address these risks?

The five current potential cost pressures identified by the NDIA are:

Higher than expected numbers of children entering the Scheme;

Increasing package costs over and above the impacts of inflation and ageing (“super-imposed” inflation);

Potential participants continuing to approach the Scheme;

Lower than expected participants exiting the Scheme; and

A mismatch between benchmark package costs and actual package costs.

In line with the insurance approach of identifying risks early and putting in place management responses to mitigate the risks, the NDIA is implementing responses to these potential pressures. These responses have included the ECEI approach, the first plan process, and several smaller projects including the analysis of reasonable and necessary costs across the lifespan; guidelines on reasonable levels of family support across the lifespan; focusing on psychosocial disability; further guidance on chronic health conditions; and, investment in SLES to assist school leavers into employment.

Managing risks to financial sustainability requires a clear understanding of the drivers of success, rigorous monitoring of emerging experience and a disciplined process to respond to issues and trends. To achieve this, the NDIA maintains a senior executive liability working group involving the Scheme Actuary, the Chief Operating Officer and the Chief Risk Officer. This working group in particular closely monitors the success of NDIA initiatives to address trends and modifications to key internal processes such as eligibility and support assessment. This review and feedback loop is critical to insurance governance principles and management of long term financial sustainability.

The NDIA is focused on supplementing this centralised expertise by recruiting business leaders and staff with broad social and commercial insurance expertise who are familiar with the disciplines and practices of rigorous monitoring of actuarial outcomes. Comprehensive training, education and support for decision makers and their supervisors on the importance of the prudential control cycle, the features of a social insurance model and the imperatives of understanding the liability impact of delegates’ decisions is also crucial.

There are other potential cost drivers that the NDIA can influence to a much lesser degree such as the role of governments in actively building understanding and responsiveness of mainstream support systems and ensuring enhanced consistency in the access to supports through these avenues in accordance with the agreed COAG interface accountabilities will remain a major cost control. Specifically, the role of mainstream in relation to out of home care arrangements for children, community mental health, early intervention for children, and preventative health.

Similarly, withdrawal of governments from ILC type activities that provide opportunities for inclusion for participants would pose significant risk in expectations of higher level funded supports to achieve these inclusion goals.

Although this category of risks is largely beyond the NDIA’s direct remit, the NDIA undertakes a comprehensive consideration of all risks to financial sustainability as part of strategic risk management processes – including those over which it has limited control. The NDIA then looks to limit potential exposure through mitigation strategies designed to leverage influences across all available avenues.

Continuing close relationships between the NDIA and DSS as the policy department are critical to ensure risks are clearly understood and jurisdictional policy settings remain supportive. Key policy settings include delivery of mainstream services consistent with the National Disability Strategy and introduction of National Injury Insurance Scheme (NIIS) principles. These policy settings are fundamental for management of long term financial sustainability in line with Scheme design principles.

Question 63

Does the NDIA’s definition of financial sustainability have implications for its management of risk? Are there risks that are beyond the NDIA’s remit?

The NDIA maintains a comprehensive risk management process centred on a full range of strategic risks. Current key strategic risks to financial sustainability include:

internally focused risks such as key policies and decision making processes, staffing and delivery partnerships, and ensuring optimal usage of funding allocations

partner focused risks such as maximising value from shared service partnerships; and

externally focused risks such as ensuring emergence of adequate provider markets and workforce and maintaining necessary jurisdictional and community supports.

The management of strategic risks are continually reviewed and plans refreshed on at least an annual basis. To this end, a major exercise is currently underway to review and more clearly articulate the Board’s assessed importance of and appetite for the management of identified strategic risks. This will ensure alignment of NDIA plans and resource allocation with management of risk.

Many risks to Scheme sustainability are beyond the direct remit of the NDIA including risks associated with access for people with chronic health conditions, interpretations of reasonable and necessary by the AAT or Federal Court and performance of mainstream service systems to support people with disability to achieve outcomes.

However, as discussed above, while the NDIA may not have direct control of management of such risks, it does have the accountability to identify, understand and respond to these risks as far as possible. Responses may include quantifying the risk and identifying possible policy change as required. Maintenance of NDIA access to appropriate policy forums is critical so as to understand and influence policy issues that have sustainability impacts.