2017 Price Controls Review Consultation on ndis pricing arrangements
5.2.Purpose of price reviews
The purpose of a price review is to examine whether the price controls are supporting the NDIA’s market stewardship objectives. Price reviews help ensure that the NDIS is best achieving these objectives by:
The NDIA’s approach to pricing is evolving. The NDIA expects that as the NDIS matures, better data will enable price controls to be refined and price limits will be changed or removed. Some arrangements have already been significantly updated since the beginning of the NDIS trial as the NDIA has responded to market feedback.
The price review is an opportunity to assess the price controls for supports provided through the NDIS. It is the NDIA’s aim to continue to review price controls to ensure prices and support categories remain appropriate over time.
6.Questions for the 2017 price review
The NDIA is focussing on two areas in the 2017 price review:
the price limits for attendant care – discussed in section 6.1; and
the classification of services under group based community activities – discussed in section 6.2.
The NDIA is also proposing to make numerous other smaller improvements for the 2017 Price Guide, which will not be reviewed in detail through the impact assessment process, and are set out in section 6.3. An impact assessment may be undertaken to explore these proposed changes further if feedback demonstrates that these changes may cause substantial negative impacts that the NDIA may not have considered.
The feedback received through the consultation process will form an important part of the decision on whether or not to implement the options proposed below.
6.1.Price limits for attendant care and related individual supports
Attendant care supports are currently subject to a price limit. There are different price limits for the provision of self-care activities at different times of day, i.e. daytime, evening, Saturdays, Sundays and public holidays, and by the complexity of the care required, i.e. standard and higher needs.
6.1.1.Areas of interest
Feedback from stakeholders has identified two areas of interest in pricing for attendant care:
price levels not being sufficient to recover reasonable costs, including sufficient allowance for profit, incurred by support providers; and
a lack of transparency on the assumptions and methodology used to calculate price controls (which could affect discussion about how price arrangements relate to other parts of the NDIS, as well as debate about the price controls themselves).
These are examined further below.
The level of price limits for attendant care
NDIA currently sets price limits on the hourly rates providers are able to charge for attendant care.
The NDIA sets prices for attendant care using a bottom up cost model (hourly rate model) based on the national industry award.5 These rates are then cross-checked against rates under schemes covering similar services, such as the Transport Accident Commission (TAC) in Victoria.
Some stakeholders have expressed concerns with regards to the current price limits for attendant care, such as:
the current price levels are not sufficient for providers to recover their costs;
there is inconsistency in price limits across similar supports that may be creating perverse incentives for providers, such as centre based care and different group based care ratios; and
price limits for the provision of overnight supports may not be consistent with other rates.
Transparency around inputs and assumptions
The NDIA previously issued guidance on the approach to determining the prices for attendant care in 2014.6 Going forward the NDIA intends to provide greater transparency in how this model works and its use in determining pricing arrangements to:
ensure that price caps are set at the appropriate level;
allow the sector to provide greater input into the model; and
help providers understand how price caps are determined and how it may change in future.
6.1.2.NDIA approach and request for feedback
As part of the current price review, the NDIA is planning to:
review the methodology and approach when setting price limits for attendant care and revise the hourly rate model used to estimate the cost of providing these services by a reasonably efficient provider; and
encourage transparency by consulting with stakeholders on the assumptions underpinning the calculation of price limits for attendant care.
The NDIA seeks feedback from stakeholder in two areas:
Approach to setting price limits
The NDIA aims to set price limits that maximise value of money for participants over the long run, which requires a careful balancing of the benefits and costs of tighter and looser price limits, as set out in section 5.1. The NDIA proposes to set price limits with reference to the efficient costs that a provider incurs in providing these supports.
The NDIA has received feedback from providers suggesting the provision of attendant care is not homogenous, i.e. individual providers may provide differing levels of quality or design their services in different ways.
Some variation in prices for supports is likely to occur within the same support category. The NDIA is considering options for setting price limits above what the NDIA considers to be the efficient price to take this variability into consideration and is seeking stakeholder views on the extent of variation in the cost of providing supports provided under attendant care.
The NDIA also proposes to adjust its assumptions regarding the costs that providers incur over time. The NDIA also seeks stakeholder views on the appropriateness of adjusting these assumptions to reflect improvements in efficiency.
The NDIA is seeking feedback on possible changes to the price limits for attendant care, and in particular, responses to the questions set out below.
Assumptions to be used in the hourly rate model
For the 2017 price control, the NDIA is open to revising the hourly rate model. The current assumptions used in the model are set out below, including some potential changes the NDIA is considering.
To ensure that this model represents the real cost of delivering attendant care, the NDIA is seeking feedback from providers and interested stakeholders on whether these assumptions are correct and what other costs should be considered.
Note that the assumptions below model described below outlines the cost assumptions for the provision of standard needs attendant care. This forms the basis for determining price caps and benchmarks for the range of attendant care needs and support offerings covered by the NDIS.
Table - Assumptions applied in estimating the efficient cost of provision for attendant care
The majority of the assumptions above are based on the Award or related legislation; however, several were determined based on assumed averages for the sector.
The NDIA recognises that the assumptions relating to span of control and overhead could vary, based on factors such as:
the location of the providers;
the size and scale of providers; and
the types of services being offered.
The assumption for average span of control is that for every 15 staff members, one manager will be employed. This is based on a typical medium sized provider, employing between 40 and 100 staff.
The assumption is that overhead costs are generally low for attendant care as the majority of the operational costs are labour. The following were considered typical overhead costs for a medium sized attendant care service provider:
data and IT services;
building and equipment maintenance;
The box below contains the consultation questions on which the NDIA seeks responses from stakeholders with regards to assumptions for estimating prices for attendant care.
6.2.Simplification of ‘shared care’ price controls
Shared care covers a range of support categories in the current price guide, including:
group based activities;
centre based care;
6.2.1.Areas of interest
Providers are required to align quotes and service offerings they provide to the NDIA to the support line items specified in the price guide. The NDIA has received feedback that some providers have had difficulty aligning their service delivery models to the support line items for group based, or shared care service offerings. In particular, stakeholders have indicated the following questions with the categorisation of these supports:
The NDIA has observed that a significant number of providers are:
not quoting in line with the line items for group care, particularly SIL;
not efficiently matching care ratios to their service offerings; and
quoting 1:1 care rates for group care.
The NDIA has a number of concerns regarding these issues:
participant choice may be restricted due to difficulties faced by providers in quoting appropriately for some supports;
participants may face additional difficulties in assessing quotes, which is likely to lead to greater transactions costs and resistance to switching providers;
price controls may be ineffective if providers are being paid for supports that differ from the supports provided; and
the NDIS may not be providing the maximum value for money, with the ineffectiveness of price controls resulting from inappropriate definitions of supports.
6.2.2.NDIA approach to shared care and request for feedback
The NDIA is considering whether the current price controls for group based care should be restructured to simplify the controls and better align them with the nature of the supports provided.
For price controls to be effective and to achieve their intended purpose:
support definitions should not overlap – overlapping definitions cause confusion about the appropriate support categories to be used in claiming, which may diminish the effectiveness of the price controls – this also affects the quality of data that the NDIA receives on the nature of the supports provided.
The NDIA will consider whether a restructuring of the support line items in the price guide are necessary if providers are having difficulty aligning the supports they have provided to categories in the price guide. This may involve:
The NDIA is also considering whether changes to these support categories should be staged or all changed at the same time.
The two broad options being considered by the NDIA are discussed below. Stakeholders are encouraged to provide feedback on the options presented, or to suggest alternative options that might address the issues raised above.
Option 1: Merge community based and centre based care price controls
Separate controls are currently in place for group based activities conducted in centres and in the community. Group based activities conducted in the community are split based on the complexity of care and the care ratio, while this distinction does not exist for centre based care.
Some stakeholders have indicated that, for price control purposes, the distinction between these two categories is somewhat arbitrary, owing to the fact that the nature and costs of providing these supports are quite similar. In addition, these two settings may not be as binary in practice, adding complexity to the quoting process.
This option would involve combining these two groups of supports into a single set of price limits, in a format that reflects the categories under group based community, social and recreational activities. Prices would be reviewed to assess what price limits would be appropriate under this new structure.
Option 2: Introduction of price matrices for shared care
Stakeholders have expressed concerns that the current support line items do not adequately capture the differing care ratios and varying complexity of care required for different participants.
This option would be to restructure the support line items so they can be specified in a ‘matrix’ of rates that provides prices based on the complexity of the participants needs and the care ratio provided.
and Figure show indicative matrices specifying prices based on complexity and care ratios for 1 carer and 2 carer ratios.7
This approach would address multiple questions with the current structure of price controls:
providing additional support line items for supports that were previously not covered, eg, care ratios besides 1:2 and 1:3 and additional care complexity categories;
creating consistency in the price limits across group based care provided in the community and in centres; and
simplifying the support line items to reduce the complexity of quoting for providers and the difficulty in assessing quotes for participants.
Figure - Indicative matrix with prices by care ratio and complexity – 1 carer
Figure - Indicative matrix with prices by care ratio and complexity – 2 carers
The box below contains the consultation questions on which the NDIA seeks responses from stakeholders with regards to implication of shared care price controls.
6.3.Other updates to price controls, rules and guidance
6.3.1.Updates being considered based on market feedback
The NDIA seeks to undertake a range of annual improvements to the price guide based on feedback and observed inefficiency that arise as the market changes through transition.
The NDIA is considering options set out in Table 3 to improve the guide and the NDIS payment system, to ensure it continues to represent services being provided and the needs of participants.
Table 3 – Options for updating the 2017 Price Guide
Any feedback on these topics is encouraged.
6.3.2.NDIA approach and request for feedback
The NDIA plans to establish a set of guidelines for annual maintenance to the rules and guidance around the price controls. Of particular interest will be stakeholder views on:
forms of guidance that will be useful; and
impact of changes to guidelines on forward-looking plans for participants and providers.
The NDIA is considering options for changing the structure of price controls in future price reviews.
The NDIA seeks feedback on whether some price limits should be changed to consist of two components:
a benchmark price that reflects the efficient costs of providing a reasonable and necessary level of care; and
The purpose of these changes would be to:
encourage providers to improve their efficiency over time, while maintaining service standards, by allowing the benchmark price to act as a reference point;
reduce significant use of market power with the price cap; and
create greater flexibility in plans, by allowing participants to purchase:
Such an approach may lead to a number of benefits relative to the current price controls, including:
allowing price limits to be raised as competition increases, while maintaining price expectations that participants should have; and
There are number of considerations that the NDIA will need to note in deciding on how best to utilise price bands for different supports, including:
The box below contains the consultation questions on which the NIDA seeks responses from stakeholders with regards to price banding.
9.Responding to this consultation and next steps
The NDIA is seeking to ensure that changes to price controls are openly consulted on, so that providers and participants have an opportunity to identify areas of concern and to raise issues that affect the services they provide and receive.
All feedback received through this consultation process will be considered. Responses to this discussion paper are due 13 April 2017.
The NDIA will analyse responses provided by stakeholders, and assess the potential impacts of change options, to determine which changes, if any, should be implemented. The 2017/18 price guide, is intended to be published in late May, to take effect from 1 July 2017.
Figure - Timeline of 2017 price review next steps
9.2.Preparing and lodging a submission
Submissions may range from a short letter or email outlining your views on a particular topic to a more substantial document covering the full range of issues. Where possible, please provide evidence, such as relevant data or documentation, to support your views.
A brief overview of the nature of your organisation, the number of employees and participants, the types of services you offer and the locations you operate would be helpful.
Please note any information that you believe to be of a confidential nature should be clearly marked or identified as confidential. The NDIA will not disclose the confidential information to third parties, other than advisors or consultants engaged directly by the NDIA, without first providing you with notice of its intention to do so, such as where it is compelled to do so by law.
The NDIA’s preference is for submissions to be lodged via email. Submissions will also be accepted by post.
By email: MarketandSector@ndis.gov.au
By post: 2017 Price Review
National Disability Insurance Agency
GPO Box 700
Canberra ACT 2600
The deadline for submissions is 13 April 2017.
1 NDIA, NDIS Market Approach – Statement of Opportunity and Intent, November 2016, p 6.
2 NDIA, NDIS Market Approach – Statement of Opportunity and Intent, November 2016, p 4.
3 Market power is the ability of providers to raise prices above the competitive level in a profitable way. See: Motta, M, Competition Policy – Theory and Practice, pp 40-41.
4 The level of the competitive price is uncertain and will vary over time, across locations and depending on the precise service being provided, and so there is always some risk that a price cap could be below it.
5 Social, Community, Home Care and Disability Services Industry Award 2010
6 See the NDS/NDIA joint report on the pricing at https://www.ndis.gov.au/document/pricing-joint-working-group-final-repor.
7 The purpose of having 1 carer and 2 carer matrices is to allow for additional factional care ratios.
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