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1 National Disability Insurance Scheme. May 2012 Chamber of Commerce and Industry of Western Australia (Inc)

2 Contents Executive summary 3 Background 4 Western Australia current disability services 6 Funding options 8 Governance options 10 Summary 11 2

3 Executive summary The Productivity Commission released its report into Disability Care and Support in July Its Terms of Reference included the commitment by Government to a National Disability Strategy and a request to the Productivity Commission to inquire into a National Disability Long-Term Care and Support Scheme. The Productivity Commission report recommended a new National Scheme, the National Disability Insurance Scheme (NDIS), to provide insurance cover for all Australians for high quality care and support. The NDIS would provide a more effective link between the community and people with disabilities and provide more information for people. It was further recommended that a single agency, the National Disability Insurance Agency, oversee the NDIS. The NDIS has bipartisan political support and the reforms were backed at the Council of Australian Government (COAG) meeting. There are two main considerations canvassed in this paper and currently unresolved by COAG, namely the options for funding the NDIS and the options for governance, noting the current arrangements for disability services in Western Australia and the injection of funds into the not-for-profit service providers in the 2011 State Budget. CCI recommends: that funding should come from consolidated revenue, noting the need for a thorough review of current expenditures; and a federated governance model which leaves WA in charge of its own system with the additional surety of funding from the Commonwealth into the future. 3

4 Background The Productivity Commission released its report into Disability Care and Support in July The key recommendations were: the creation of a National Disability Insurance Scheme (NDIS) providing insurance cover for the care (not income) of all Australians in the event of significant disability; guaranteed funding for the NDIS, entrenched in legislation, funded through a combination of cuts in existing lower-priority expenditure, fiscal drag and, if necessary, tax increases; funding for disability services needs to double nationally from around $7 billion to $13.5 billion per annum; a single new National Disability Insurance Agency reporting to all Governments acting as an assessor and funder, but not provider, of disability care and support services; funding based on needs, not how disability is acquired or where people live; and a separate scheme for people requiring lifetime care and support for catastrophic injuries, the no-fault National Injury Insurance Scheme, providing full care comprising a federation of existing State and Territory schemes. The Terms of Reference for the development of a national disability strategy are based on the significant unmet demand for services for people with disabilities, demographic changes and the decline in availability of informal care that continue to place pressure on the system. It is argued in the report that the current system is unsustainable as well as being inequitable, under-funded, fragmented and inefficient. There is no certainty that people with disabilities can access appropriate services, there is little or no choice and there are gaps in services. The costs of doing nothing include the persistence of identified deficiencies and the likelihood of things getting worse. The Inquiry conducted by the Productivity Commission focused on designing what it terms as a coherent national system, centred on removing the deficiencies of the current arrangements. One such deficiency is that the present system is inefficient with weak governance, with proposed arrangements for the new scheme being run to insurance principles by a commercial board with monitoring by Treasury. It is for this, and other reasons, that the Productivity Commission proposes a NDIS overseen by a National Disability Insurance Agency which would provide assessments and funding to individuals and organisations. In recommending a single national governance model, the Productivity Commission outlined several core features of such a structure. These included: the same eligibility criteria, assessments and access to the full range of necessary supports. That is, people with equal disability status would receive the same entitlements based on need; certainty of future resourcing; management of an insurance scheme and the necessary reporting arrangements; a shift from block funding and a service centred model to one in which people with disabilities and their carers can make individual and informed choices, supported by nationally consistent and publicly available measures of the performance of service providers; and a focus on individual needs and outcomes. 4

5 In order to run an effective national system, the Commission s strong view (p.37 of Overview) is that these core features would best be met by the establishment of a single agency that would oversee a coherent system for all Australians, regardless of their jurisdiction. They also briefly proposed, but dismissed, a model that saw the roll-out of the NDIS to those States and Territories that recognised the advantages of a national model, with other jurisdictions joining when they wanted to gain advantage of that system. The advantage of this proposal is that reforms would not be delayed, but the disadvantage would be a continuation of a fragmented system in some jurisdictions. A federated model was also dismissed as not providing the assurance of high-quality long-term care and support. At its conference in December 2011, the Labor Party announced the establishment of a new agency to lead the work on the design of the launch of the NDIS. The Gillard Government pledged to provide $10 million for projects that examine how to deliver individual, personalised care so that Australians with a disability can have access to the services they need, giving them greater control and choice over the services they receive through individualised funding. The proposed NDIS is a universal insurance scheme that will provide insurance against the costs of support if Australians, or their family members, acquire a significant disability. It is also for people with, or affected by, an existing disability who can access the system for information and referral services. This initiative would rely on community networks to provide support and care to people with disabilities. Finally the NDIS will be targeted at a small number of people with significant care and support needs. The scheme therefore has three tiers, ranging from minimising the impact of disability, through community engagement to fully funded support and early intervention. It would cover all existing people receiving disability support as well as people who acquire a disability after its introduction. A sophisticated assessment system, to determine eligibility, has also been proposed. The scheme has been endorsed by the sector (government and non-government) which supports fundamental reform to a system based on welfare payments, to become one where funding is legislated nationally. This will lead to certainty in the sector as well as enabling the building of a sustainable and consistent system into the future. 5

6 Western Australia current disability services The Disability Services Commission (DSC) in Western Australia is a unique government agency that focuses exclusively on meeting the vast range of needs of people with disabilities. One in every five Western Australians reports a disability and most people with disabilities live in the community, independently and/or with the informal support of families and friends. 1 Around 70,000, however, require assistance for personal care, mobility or communication. This group is commonly regarded as comprising those who have the most severe disabilities and/or incur serious restrictions in activities of daily living, thus requiring specialist disability services. It should be borne in mind that the group is not homogenous and disabilities include cognitive, physical, sensory, intellectual, neurological and psychiatric occurring at any stage of the life span, from birth through to old age. The State Government maintains that the WA disability services system has been recognised, both nationally and internationally, for its innovative and contemporary approaches to providing person centred and self-directed support through individualised funding arrangements. 2 Client focused or individualised funding allocates funds directly to individuals who then choose their own service or provider, as opposed to funding where providers deliver services to eligible clients. This form of funding underpins many of DSC s programs and is viewed positively within the sector due to the variety of services that it offers which give clients and their families empowerment, some control and choice. More than 65% of DSC s costs go to disability not-for-profit organisations to provide services and supports. In , this was $348,173,358 across 116 organisations. The total cost of DSC services in the same period was $542,225, For , the estimated cost of services is $610,780,000, with increased base funding reflecting a higher demand. The State Budget saw a much-welcome injection of funds into the sector, including a share of the $1 billion Social Services Package consisting of $604 million over five years to support sustainable service delivery by the not-for-profit sector, $151 million over three years for housing for people with severe disability, mental illness, or drug-related difficulties and an additional $41 million over fouryears for disability services. 4 Funding arrangements are generally regarded as adequate currently and have received additional indexation and growth funding in line with the increased demand. Improved demand planning means that funding levels are realistic and adequate for current needs but, for the sustainability of the sector into the future, additional long-term funding arrangements are required. 6

7 There are, however, possible difficulties with the current individualised funding system. First, there is a risk that clients will move around a great deal making income predictions and planning difficult for service providers. In addition, there needs to be a quality framework surrounding the services and the funds allocated must be realistic. While based on sound principles, it can be argued that individualised funding does not work for all services and there needs to be flexibility of funding models depending on the outcomes required. Any model that facilitates choice and portability requires some basic level of infrastructure to provide adequate services. Currently, this role is taken by the DSC itself, which continues to provide some services funded by the State Government. Another benefit of the WA system, the Local Area Coordination (LAC) model, creates longterm relationships through networks of service providers, generally in the non-government sector. This assists both the clients and the service providers through the provision of personal and formal capacity respectively. CCI believes improvement can be made to the way DSC operates, particularly in terms of the levels and certainty of funding, but maintains that the existing system should be extended not changed. Many aspects of the Productivity Commission s proposal are regarded as consistent with the WA system, particularly in relation to individualised and self-directed funding and in the offering of choice through not-for-profit service providers. The WA disability system is based on establishing strong relationships and investing in partnerships, along with retaining the local element which is essential for successful outcomes. The non-government (or not-for-profit) organisations claim greater efficiency and greater value of their services relative to government services. 5 In WA, 65% of disability services are provided in the non-government sector with current reforms to funding levels, procurement and contracting being made to strengthen the sector. 6 With all these developments, there is a strong belief that the system in WA is not in need of major change. It is recognised, however, that reforms including increased funding and national consistency would lead to improvements. The WA Government maintains that any changes should be built on current State-based systems and use State control of funding and governance. The WA Government also wishes to retain and enhance the current levels of informal care at the community level and to support the development of workforce skills for the sector. There is a case for local control and decision-making in a model of selfdirected funding and choice. The LAC model in WA facilitates such a system and should be enhanced through increased funding. While there is not a need to change the local disability sector within WA, the only way for the disability sector to grow and be sustainable nationally is through increased commonwealth funding, coupled with consistent outcome quality standards and nationally consistent assessment criteria. This requires review of the proposed ways of doubling the necessary national funding (from around $7 billion per annum to $13.5 billion) and of the best model of governance. 7

8 Funding options In the draft report and during the consultation period, much was made of the proposed Medicaretype levy as a way of funding the NDIS, together with national administration of the scheme. The final report places greater weight on the scheme being financed from consolidated revenue. Such funds would be directed into a National Disability Insurance Premium Fund using an agreed formula enshrined in legislation. The Productivity Commission recommends that the Federal Government take full responsibility for the funding of the NDIS, arguing that this provides certainty and clear lines of funding responsibility, avoids inefficiencies and the Commonwealth- State blame-game and reflects the Government s capacity to raise efficient and sustainable taxes of the size required. The establishment of a National Disability Insurance Premium Fund would require a review of current spending patterns with the aim of identifying areas where savings could be made. This proposed funding model is consistent with CCI s position on the need for a review of Government spending programs to identify areas of waste and inefficiency and reduce the overall tax burden on the community. 7 Spending on the NDIS from consolidated revenue would require such a review of spending. CCI supports the option proposed by the Productivity Commission of full funding for the NDIS from a National Disability Insurance Premium Fund, using savings from other areas of spending and building up reserves to spread the costs of the scheme. Periodic review of the revenue formula would be necessary if adjustments were required should the reserve position deteriorate. It is essential that the revenue requirements are fully met. The financial arrangements discussed by the Productivity Commission all assume a net funding requirement of $$6.5 billion and a gross funding requirement of $13.6 billion. The gross funding estimates are a snapshot based on 2009 figures and do not accurately reflect forward estimates and displaced budgetary spending by Governments. There are no details regarding the estimated costs but they seem to be based on budget papers which is a reasonable approach. It is noted in the Report that a return on investment cannot be measured with such an approach. The assumption criteria include certainty for people and a long run approach to managing costs and outcomes while the implications are sufficiency and predictability. 8

9 If funding is to come from consolidated revenue, the model described by the Productivity Commission leaves it to the Australian Government to divert specific funding. This relies on cutting wasteful or less necessary expenditure. If the NDIS is to proceed, more detailed modelling would be required on the costs as well as on the impact on future budgets. Government would also be required to detail which programs it would scrap to allow the diversion of consolidated revenue. Wise investment of dollars on supporting a universal disability insurance scheme has long term benefits for individuals as well as economically. With the National Disability Insurance Premium Fund, there would be savings in future support and care costs in the long-term due to early intervention, the fiscal gains from reduced income support as people with disabilities and their carers enjoy participation in the workforce and from the likelihood there could be increased productivity in the disability sector more generally through incentives and higher wages. Additional funding would allow the expansion of the existing WA disability system and boost the capacity for increased demand into the future. 9

10 Governance options The Productivity Commission recommends that governance of the NDIS be through a single national agency that would be the independent assessor and funder, but not the provider, of services. CCI supports the State Government and local sector view that the management of the insurance scheme in Western Australia remains within WA since it has a well-established system through the Disability Services Commission and its organisation such as the LAC model. WA has a good track record in delivering services to people with disabilities through individualised funding and the provision of accessible services and any new scheme should take advantage of these. There are three possible options for retaining and expanding the current WA governance model: Option 1 It is argued that local implementation through existing dedicated agencies is possible through the delivery of services according to national polices and principles. One option therefore is to build on existing high-quality services and systems. Best practices in different jurisdictions may mean that different local considerations will have to be taken into account to achieve equitable outcomes for people with disabilities. National consistency would be fair for everyone. Option 2 Alternatively, the Federal Government could set the legislative framework for each State and Territory to pass its own legislation. This would ensure there is uniform implementation of new State-based legislation which is nationally compliant. Retaining local governance of the scheme would make sure local circumstances are addressed and managed. In WA, it would mean retaining and building on existing systems and structures with the added surety of on-going funding. Option 3 A third, middle-ground, alternative proposed by the State Government and many of CCI s disability services providers, is a federated model. This would be based on nationally agreed standards of service delivery and consistent data collection, again with State responsibility for delivery of services and funding. This is the option preferred by CCI as it leaves WA in control of its own system but with additional Commonwealth funding through the NDIS to provide surety into the future. This option would require national quality standards, national eligibility criteria and nationally consistent access to services and supports. Nationally consistent and publicly available measures of the performance of service providers would govern the system to ensure that individual decision-making is based on choice and options. 10

11 Summary CCI supports the introduction of a National Disability Insurance Scheme through an extension of existing disability services with the certainty of funding. Such funding should come from consolidated revenue and must be achieved through savings from other areas of spending and building up of reserves. Funding would be allocated to individuals based on need, after careful eligibility assessment, for the purchase of services as required. CCI supports a federated model of governance with local management of the system based on the existing WA model. Nationally agreed assessments and performance outcomes would be in place to make sure the system did not vary across States and was less fragmented and ad hoc than is currently the case. 1 Australian Bureau of Statistics (2004) Survey of Disability, Ageing and Carers. Canberra: Author. 2 Premier of Western Australia (2011). Submission to the Productivity Commission draft report on Disability Care and Support. 3 Disability Services Commission (2011). Annual Report. 4 WA Government (2011) Budget Papers. 5 Productivity Commission (2012). Review of Government Services Ron Chalmers (2001). Case study How the reforms are being implemented in the disability sector. Presentation to the Partnership Forum breakfast 16 December. 7 CCI (2011). Tax Reform: Building the Foundations for a Strong Economy. 11

12 Chamber of Commerce and Industry of Western Australia (Inc) 180 Hay Street, East Perth, Western Australia 6004 (08)

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