2017 Price Controls Review Consultation on ndis pricing arrangements

2017 Price Controls Review

Consultation on NDIS pricing arrangements

1.Discussion paper

2.

3.March 2017

4.Key information and how to respond

The National Disability Insurance Scheme (NDIS) is changing the way disability services are delivered by creating a new marketplace in which participants have unprecedented choice in the services they receive. The National Disability Insurance Agency (NDIA) is the steward for this new marketplace, and during transition has a role in ensuring that the market operates in a way that helps the NDIS achieve its objectives. As part of this role, the NDIA applies price controls (along with related arrangements; e.g. service definitions and payment rules) to a range of supports that can be purchased under the NDIS.

The NDIA monitors price controls through its annual price review to ensure that the NDIS is delivering value for money and fostering choice and innovation in the marketplace. The purpose of this document is to seek feedback on areas of interest for the 2017 price review. The questions presented are based on the feedback received from stakeholders during 2016 price review, and further participant and provider feedback received by the NDIA over the past 12 months.

4.1.Focus for this review

The NDIA undertakes regular reviews of the Price Guide to ensure that pricing arrangements align with the requirements of the market through transition. If you are not familiar with the Price Guide it can be found on the NDIS website at - www.ndis.gov.au/providers/pricing-and-payment.

This review will focus on:

the levels of price controls for supports under the categories of ‘assistance with self-care activities’ and ‘assistance to access community, social and recreational activities’ (attendant care);

simplification of shared care price controls; and

other specific updates to pricing arrangements.

4.1.1.Items not within scope

The NDIA is happy to receive feedback on any aspect of NDIS pricing arrangements, to inform this and future price reviews; however, this price review is not the only project that could have financial implications for support providers and other stakeholders. The NDIA also conducts separate reviews that consider broader market issues, including participant funding. To avoid overlap, this review will generally not consider changes to pricing arrangements that would be best addressed in a broader market review. Current examples include:

employment supports;

school transport, and

specialist disability accommodation.

4.1.2.Provider Benchmarking Project

Separately from this price review, the NDIA working with disability support providers and peak bodies to establish an industry benchmarking function.

This benchmarking function will be run by an independent survey manager, which will collect financial and non-financial data from contributing providers. This information will be de-identified and aggregated to protect providers. The NDIA will not have access to individual provider data, and participating in the benchmarking surveys will be completely voluntary.

Benchmarking data will give providers and the NDIA a better understanding of the operating costs of providers under the NDIS. The NDIA will receive reports from the survey manager that will be used to inform its decisions (e.g. participant funding and price controls). Participating providers will also receive an individualised report, allowing comparison of their results with industry peers and best practice, to assist providers in moving to the NDIS participant-based funding model.

4.2.Responding to this consultation

The NDIA has provided questions throughout the paper (in grey boxes) to help target feedback; however, respondents are welcome to comment more broadly. Where possible, please provide evidence and examples to support your views. Examples from your own business experience, or that of your members would be of particular interest.

The NDIA will review responses along with evidence collected through market monitoring and research, when evaluating potential amendments to pricing that may benefit the participants, the market and the NDIS. Feedback from providers not reflected in changes to the 2017 Price Guide will be noted and may be included as part of future price reviews.

Information on how to respond to this discussion paper can be found in section 5. The deadline for submissions is 13 April 2017.

4.3.Structure of this document

This document is structured as follows:

• 
  section two explains why the NDIA sets price controls and undertakes price reviews;
  
• 
  section three sets out the questions that the NDIA is investigating in this price review, and possible approaches for addressing them;
  
• 
  section four discusses price banding – a potential new approach to price controls – which is being considered for future price reviews; and
  

section five explains how stakeholders can respond to this consultation and the next steps in the price review process.

5.Background on NDIA price reviews

This section provides an overview of the role of price controls in the NDIS and sets out the purpose of the price review process.

The NDIS represents a once in a generation change to how disability supports are delivered. Before the NDIS, government funding arrangements for the disability sector were typically programmatic, predominantly in the form of block funding from government directly to disability providers.¹

The NDIS aims to create:²

an efficient and sustainable marketplace through a diverse and competitive range of suppliers who are able to meet the structural changes created by a consumer driven market.

The NDIS aims to ensure that participants have choice and control over their supports and support providers, and to give providers the freedom to attract participants with innovative and high quality products and services. The growth in the market for supports is expected to be substantial in the early years of the NDIS.

The NDIA has a role as a market steward of the NDIS market during the transition to a competitive, open, individually-commissioned market for disability supports, noting that:

the transition from block funding to a market approach requires careful management; and

some of the markets created may require some form of economic regulation, even after the transition is complete.

The NDIA’s approach recognises that the operation of the NDIS market is not yet mature and that:

• 
  consumers are adapting to the new market and learning to exercise choice, and to express their individual needs; and
  
• 
  the matching of providers offering services, and participants wanting supports, is still evolving.
  

5.1.Role of price controls in the NDIS

During transition, price controls are in place to ensure that participants receive value for money in the supports and services that they receive.

There are currently two forms of price control used by the NDIA:

• 
  price limits, which are maximum prices that providers can charge for a particular support; and
  
• 
  price benchmarks that indicate the NDIA’s view of the cost of efficient service delivery, which should achievable by most providers. Benchmarks act as thresholds that, if exceeded, trigger requirements for additional justification or review by the NDIA.
  

Price controls are part of a broader set of pricing arrangements, which includes definitions of the services subject to price controls, and payment rules. These arrangements are considered together when assessing the appropriateness of price controls as part of the review process.

5.1.1.Rationale for imposing price controls

Price controls may be required where providers have substantial market power.³ Where this is true, providers might otherwise be incentivised to set excessive prices (i.e. above the level that would occur in a competitive market). This may happen because:

• 
  participants may not have sufficient information to make effective choices – participants need information on the quality and price of service to make effective choices about the best provider for them. This means providers have less incentive to improve their services if this information is not available as participants won’t use their power as consumers to ask for these improvements;
  
• 
  participants may have insufficient incentives to look for alternative providers – certain aspects of the NDIS may mean that participants do not receive the full benefits of switching to lower cost providers and therefore may not actively seek out alternative providers. For example, a participant has less incentive to save money on a given support item if the remaining budget cannot be spent on other products or services;
  
• 
  there is a lack of choice of providers coupled with barriers to entry – for example, markets for highly specialised supports may have a small number of providers and high entry costs that act as barriers to new entrants; or
  
• 
  there are high costs to switching providers – switching costs are those associated with changing provider or supports, including both financial and social costs. For example, many supports provided under the NDIS are highly personal in nature and so a strong relationship is established with the provider over time. This creates resistance to switching providers and may limit competition.
  

Substantial market power may lead to higher prices and/or lower quality services for participants. Price limits can help to ensure that prices do not rise too far above the competitive level for providers that have substantial market power, whilst allowing competition to occur between those providers that do not.

Price limits are not needed when there is enough competition between providers to encourage efficiency. In this case, prices are set in accordance with costs and providers will meet consumers’ demand for quality and variety. Therefore, the role of price controls should diminish as the NDIS develops and markets for supports become more competitive.

In the roll-out phase of the NDIS, the NDIA is adopting a cautious approach to price controls in the absence of information on the competitiveness of markets for supports. The NDIA will periodically assess the role of price controls, examining whether changes may help the NDIS to achieve its objectives.

5.1.2.Characteristics of effective price controls

The NDIA aims to set price limits that maximise the value for money to participants over the long run. This requires a careful balancing of the costs and benefits of price limits, including:

• 
  a price cap that is as low as possible (but still achievable by providers) could give participants the best value for money in the short run; but
  
• 
  a price cap that is higher than the theoretically efficient level potentially leads to:
  
  1. 
     greater flexibility for providers to offer a variety of services, including higher quality services with higher prices; and
     
  2. 
     reduced risk that some providers may not be able to recover their efficient costs and/or that prices are not high enough to attract new support providers to the disability sector.⁴
     

The challenge for the NDIA is setting the appropriate price controls that reach a balance of these factors. These effects are set out in Table .

Table : The effects of setting a price cap too high or low

	Too low	Too high
Providers	Providers cannot recover their costs, and may exit the market, and new providers may not enter. Providers cannot offer higher quality services at a higher price.	Providers that do not face competition are able to set prices that are substantially above the competitive level.
Participants	Some participants are unable to find providers that are willing to provide services through the NDIS for services that are in their budgets. In the long run, services might be more expensive or lower quality, because providers have not invested in new and/or better service models.	Some participants are charged a price that is above the competitive level and so cannot purchase as many services as they would otherwise be able to.

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:

• 
  promoting transparent decision making with regards to changes to price controls;
  
• 
  updating price related controls to reflect changes in underlying costs and market changes;
  
• 
  addressing issues with price controls that have emerged since the previous review;
  
• 
  reducing regulatory burden of the NDIS over time, where appropriate; and
  

• 
  providing forward-guidance to the market on future NDIA plans regarding price controls.
  

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:

• 
  the approach to setting price limits; and
  
• 
  the assumptions to be used in the hourly rate model.
  

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.

Consultation questions – Approach to setting price limits for attendant care Question 1 (for providers) – How do you decide what price to charge participants? Question 2 (for providers) – Do you have any comments on the current price limits, eg, are current price limits sufficient to recover the costs of providing attendant care and earn sufficient profit, and do they affect the ability of your organisation to compete in the NDIS market? Question 3 (for providers) – Do you charge a different price for agency-managed participants, self-managed participants or non-NDIS participants? Question 4 (for providers) – Do you have any comments on the approach of setting price limits based on the efficient cost of provision? Question 5 (for providers) – What changes are you likely to make in your provision of attendant care (eg, quality and amount of care provided) under the NDIS if the price limit for attendant care was: not changed in the next price guide; increased in the next price guide; or decreased in the next price guide? Question 6 (for providers) – Do you have any specific concerns regarding access to sufficient labour to offer attendant care under the NDIS? If so do you feel this is impacting costs (such as wages) and if so how is your organisation responding? Question 7 (for participants) – Have you had any difficult in securing a provider that will give you the amount of attendant care services in your plan? If so, please explain the circumstances.

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

Category	Component	Current assumption	Comments and questions for stakeholders
Base hourly rate	Base hourly rate	Assumes use of The Social, Community, Home Care and Disability Services Industry Award 2010 (the Award). Employees (on average) are paid at level 2 pay point 3. Managers/supervisors (on average) are paid at level 3 pay point 2.
	Employee contract type	The majority of staff are employed on a full time or permanent part time basis. Where this is not the case, and casual or contracted staff are employed, it is assumed that their rate aligns to these pay points, noting that they are not paid for leave and other costs.	The NDIA is considering whether it is more appropriate to explicitly incorporate casual rate within the hourly rate model. The NDIA is interested in stakeholder views on this and the appropriate assumption for the mix of permanent part-time and casual employees.
	Categorisation of rates	Rates are broken into the following categories Monday to Friday (6am-8pm) Monday to Friday (8pm-12am) Saturday Sunday Public Holiday
	Shift and other allowances	Zero shift allowance costs	The NDIA is considering whether to include a shift allowance in the hourly rate model to account for additional allowances not covered by the base rate of pay. The NDIA welcomes stakeholder views on the appropriate allowance level.
Leave	Personal	Staff are entitled to 10 days paid personal leave (as per section 96 of the Fair Work Act 2009) and all 10 days are used by employees each year.	The NDA is interested if some providers are still operating under state base agreements with leave entitlements differing from the national award.
	Annual	Staff are entitled to 4 weeks paid annual leave and all 4 weeks are taken each year. 17.5% leave loading (as stipulated in the Award).
	Long service	17.98% of employees achieve a tenure of 10 years, and qualify for long service (assumed value based on the Australian Bureau of Statistics data on service tenures). 8.67 weeks long service leave is available to employees after a 10-year tenure.
Non-client facing time	Administrative time	Carers spend 95% of paid time with clients Managers spend 90% of their time with clients, or dealing with client related matters.	The NDIA is considering expanding on assumptions relating to utilisation and is interested in feedback on how staff and managers are utilised. This might include client facing time, training administration, etc.
	Travel	Zero allowance for additional travel costs
	Management costs	Span of control of managers of 1:15 (Standard needs).	The NDIA is considering whether the current assumption for the manager span of control is appropriate for the current state of the NDIS. The NDIA welcomes stakeholder views on the appropriate assumption for the manager span of control, particularly how this may vary by the complexity of need.
Overheads, allowances and adjustments	Corporate overhead	Corporate overhead is equal to 15% of total salary, management and non-client facing expenses.	The NDIA is of the opinion that corporate overheads will decrease over time as providers become more efficient. The NDIA is considering whether the current assumption is appropriate for the current state of the NDIS and what path of reduction would be appropriate going forward.
	Superannuation	Superannuation is paid at a rate of 9.5% of total salary costs.
	Workers compensation	Workers compensation is paid at a rate of 4% of total salary costs (based on the New South Wales industrial average).
Margin	Margin	Margin allowance is equal to 5% of total costs (before or after tax).	The return that a provider receives is to compensate for deploying funds to run their business (ie, through investment and working capital) and the risk they adopt in doing so. The NDIA is considering whether this profit margin is an accurate reflection of the risk adopted and capital deployed by a provider in providing the supports.
Transition pricing	Transition Pricing	Additional allowance for providers in some states and territories to give them time to adjust to NDIS funding arrangements.	The NDIA has previously indicated that this transition pricing would be progressively removed over time. The NDIA will consider transition pricing in the context of other changes.

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:

rent;

data and IT services;

building and equipment maintenance;

insurance; and

utilities.

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.

Consultation questions – Assumptions for estimating prices for attendant care Question 8 (for providers) – Are the assumptions outlined in this section appropriate for estimating the efficient cost of providing attendant care? If possible, please provide examples of your experience. Question 9 (for providers) – Do you have any comments on the suggested modelling approach, such as, on the appropriateness of the cost categories?

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;

respite; and

SIL packages.

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:

• 
  difficulty in appropriately applying the care ratio, as they are limited to 1:2 and 1:3 so that care ratios such as 2:5 are unable to be accurately priced;
  
• 
  no price limits for care ratios greater than 1:3;
  
• 
  price limits do not reflect the additional costs associated with providing supports to participants with higher needs; and
  
• 
  no specific rate in the price guide for shared care on public holidays.
  

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 reflect the actual supports provided – price limits will likely be above or below the appropriate level for some or all supports provided under a particular price limit if the definition of these supports does not reflect the supports provided;
  
• 
  support categories should cover all supports that are provided – providers may try to claim under a different support category or not provide the support if it is not clearly associated with a defined support within the price guide; and
  

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:

• 
  removing categories, such as centre based group care where there is overlap or partial overlap with other support categories, or where the support category is not fit-for-purpose;
  
• 
  re-defining supports where the support description is not an accurate reflection of the support provided in practice; or
  
• 
  overall restructure – define all group based care activities based on the individual components, eg, labour costs.
  

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

Care ratio Complexity	1:1	1:2	1:3	1:4	…	1:N
Lower needs	$XX.XX	$XX.XX	$XX.XX	$XX.XX		$XX.XX
Standard needs	$XX.XX	$XX.XX	$XX.XX	$XX.XX		$XX.XX
Complex needs	$XX.XX	$XX.XX	$XX.XX	$XX.XX		$XX.XX

Figure - Indicative matrix with prices by care ratio and complexity – 2 carers

Care ratio Complexity	2:1	2:3	2:4	2:5	…	2:N
Lower needs	$XX.XX	$XX.XX	$XX.XX	$XX.XX		$XX.XX
Standard needs	$XX.XX	$XX.XX	$XX.XX	$XX.XX		$XX.XX
Complex needs	$XX.XX	$XX.XX	$XX.XX	$XX.XX		$XX.XX

The box below contains the consultation questions on which the NDIA seeks responses from stakeholders with regards to implication of shared care price controls.

Consultation questions – Simplification of shared care price controls Question 10 (for providers and participants) – Should the structure of price controls be changed, and if so, why? Do you have any suggested changes? Question 11 (for providers) – Do you have any comments on how a change to the structure of price controls would change the services you provide or your business processes?

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

Support	Issue(s)	Options for change
Group community participation supports	The NDIA has previously consented to some providers claiming payments at the 1:2 rate for groups of two or more, to avoid disruption.	This arrangement may no longer be necessary, so the NDIA is considering removing the consent. If so, future claiming would reflect the actual support worker: participant ratios delivered.
Community participation supports	Participant transport	Clearer rules around the provision of transport services, and how to claim for these services.
Short term accommodation	Price limits apply on a flat day rate, which includes all expenses in a 24 hour period with no additional loading.	Consider whether price controls should be split by levels of need. Consider whether higher rates should apply for weekend/holiday rates. Clearer definition of the base level(s) of support expected within the daily rate. Clarify whether/how providers can claim for additional supports over and above a base level.
Therapy services	Provider travel	Adjustment/clarification of rules to maximise value for participants
Attendant care and therapy services	Cancellation policies	Clarify cancellation policies Consider whether cancellation polices should be the same across attendant care and therapy services.

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.

Consultation questions – Other updates Question 12 (for providers and participants) – Do you have any comments regarding the proposed changes to rules and controls, eg, changes that require further investigation, additional minor adjustments that should be made?

7.Price banding

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

• 
  a price cap above the benchmark price that is an upper bound on the price that can be charged under the NDIS.
  

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:

1. 
   the full quantity of supports that are included in their plan at the benchmark price; or
   
2. 
   a lower quantity of higher quality supports at a higher price.
   

Such an approach may lead to a number of benefits relative to the current price controls, including:

• 
  greater flexibility for providers and participants to negotiate and reach a level of quality and quantity of supports that meets the participant’s needs;
  
• 
  building a participant’s capacity over time to choose a set of supports that best suits their needs;
  

allowing price limits to be raised as competition increases, while maintaining price expectations that participants should have; and

• 
  greater competition among providers because they are able to differentiate their services from other providers through differing quality levels and are less likely to be ‘anchored’ to the price limit as is currently the case.
  

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:

• 
  competition must be sufficiently strong for such an approach to achieve the desired outcomes;
  
• 
  price banding may not be appropriate for critical supports (eg. where a lower level of support than anticipated) in their plan would put participant well-being at risk); and
  
• 
  regional variation among markets for supports means that price banding may not be appropriate in all regions at the same time.
  

The box below contains the consultation questions on which the NIDA seeks responses from stakeholders with regards to price banding.

Consultation questions – Price banding Question 13 (for providers and participants) – What do you think would be advantages and disadvantages of using a price banding approach? Question 14 – Do you think price banding would lead to better outcomesfor participants? If so, please give your reasons and explain for which services you think price banding would be useful.

8.

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.

9.1.Next steps

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: [e-mail]

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.