Disability insurance scheme trials 'may cost $400m more than expected'

Coalition sounds warning on overruns but implementation agency cautions against reading too much into early trends

　

By Daniel Hurst,

The National Disability Insurance Scheme trials may cost $400m more than expected, the Abbott government has warned, but the implementation agency strongly cautions against reading too much into early trends.

The assistant minister for social services, Mitch Fifield, said the Coalition remained committed to delivering the NDIS in full as he released new figures on the first six months of the trial sites.

The report presented to the Senate on Thursday showed the average costs of personalised support packages for each participant was $40,466 – down from the previously reported $46,290 figure for just the first quarter.

Fifield had previously expressed concern that the first-quarter cost of each package in the trial sites was about 30% higher than the modelled average cost for the entire scheme.

The NDIS – designed to provide individualised support for people with permanent and significant disability – is being introduced in stages. The scheme began in July 2013 in Tasmania for youth aged 15 to 24; in South Australia for children aged up to 14; and in the Barwon area of Victoria and the Hunter area in New South Wales for people up to the age of 65.

Fifield told the Senate that the number of completed plans now stood at 2,586, about half the target for this stage, and the government could be liable for cost overruns.

He said the report by the National Disability Insurance Agency indicated "that it’s likely that the budget by the previous government for the trial sites underestimated costs to the tune of nearly $400m" over three years.

"This was due to errors in the bilateral agreements negotiated by the previous government," Fifield said. "Those bilateral agreements negotiated by the previous government provide that the commonwealth is liable for all cost overruns.

"Errors of this sort are far more likely when a political timetable to achieve launch prior to an election is pursued, rather than the more prudent timetable recommended by the Productivity Commission."

Fifield’s claim is based on the $392.1m difference between the amount flagged in bilateral agreements with the states for the four trial sites, and the "actuarial baseline model". The model takes the Productivity Commission’s estimated cost for the full scheme and uses census data to estimate an amount to be attributed to each trial site.

But the National Disability Insurance Agency’s report warned against premature judgments based on early trends. It said the large residences in the Hunter and Barwon trial sites were more costly on average and this had not been factored into the bilateral agreements. In South Australia, there was a large difference between the bilateral agreement and the actuarial baseline model.

The report said the baseline estimates were "highly uncertain". While the average annualised package cost was a key factor in understanding scheme costs, it would be "misleading" to consider it in isolation.

"For example, it may be that less participants than expected enter the scheme at a higher than expected average cost, or more participants than expected enter the scheme at a lower than expected average cost," the report said. "In both scenarios the total cost may be in line with what is expected."

It said cash flow was "likely to be sufficient for 2013-14" and the participants who had entered the scheme to date would "not be representative of all participants likely to enter the scheme or the respective trial sites" due to the way participants were being phased in.

Labor’s disability reform spokeswoman, Jenny Macklin, said it was too early to make judgments about the accuracy of forecasts.

Macklin, who was in charge of implementing the scheme in the previous government, said Fifield’s claims about a political timetable were "completely false".

"The report released today clearly says that extrapolating results to make assumptions on full scheme costs is not possible at this time," she said.

"It is extremely disappointing that the Abbott government is seeking to detract from the significant progress that’s been made for people with disability, their families and carers because of the NDIS."

Macklin said 2,586 people now had approved care packages. "Many thousands of people with disability, carers and families will now be benefiting from the extra care and support. These people and many others have been ignored for too long."

Fifield said the Coalition was committed to delivering the NDIS in full but it would work to ensure its foundations were "strong and financially sustainable".

"It’s important that we ensure that Australians with disability aren’t left wondering whether a reform of this magnitude is able to stand the test of time," he said. "We need to give them certainty that the services provided to them under the NDIS are here to stay.

"That is what everything the government does in relation to the NDIS is about."

Fifield called on Labor to "put partisanship aside" and help identify issues and solutions.

In March, federal and state disability ministers are due to consider options to improve the implementation of the scheme and ensure it operates in a sustainable way.

Source The Guardian