DISCLOSURE LOG	DOCUMENT 68
FOR OFFICIAL USE ONLY

Pricing Arrangement Reference Group | 6 March 2024 | Item 3.1

2023-24 Annual Pricing Review and Disability Support Worker Cost Model

Matters for Discussion

Chair: Kee Hiaujoo, Branch Manager, Economics and Pricing

1. Purpose

1.1. To provide an update on key considerations within the Annual Pricing Review (APR) including concerns raised by stakeholders relating to the Disability Support Worker (DSW) Cost Model.

2. Recommendations

2.1. That PARG notes the APR considerations.

3. Background

3.1. The NDIA Board approved the 2023-24 APR Terms of Reference in October 2023.

3.2. The NDIS Review released their final report in December 2023. One of the recommendations from the Review is to transition the NDIS pricing functions to the Independent Hospital and Aged Care Pricing Authority (IHACPA). This transition is intended to increase transparency and independence of price setting, and to achieve better alignment with the broader care sector.

3.3. Further, the recommendation for the Australian Government to lead a comprehensive review and refinement of the current Pricing and Payments Framework signals an anticipation of substantial structural reforms in the medium to long term.

3.4. The scope of this year’s APR’s is narrowed, aiming at addressing immediate market needs and ensuring the continuity of supports for participants. It recognises the broader reform initiatives recommended by the NDIS Review and Disability Royal Commission. The APR will focus on DSW supports, therapeutic supports, support coordination and the short-notice cancellation policy.

4. APR Update

4.1. The 2023-24 APR consultation commenced in January 2024. In addition to the provider focussed consultation paper (consistent with consultation papers released to support previous APRs), a participant focussed consultation paper has been released for the first time. As of 4 March 2024, the APR has received 710 submissions, with the majority (508) coming from participants and their representatives.

4.2. Therapy supports: Initial analyses indicate the number of active registered providers has decreased (a 16% reduction in the six months to Dec 2023 compared to a year ago), with a greater increase to active unregistered providers delivering therapy supports. Preliminary findings on the comparison of market and other government schemes suggest that NDIS therapy price limits may be on par or lower for certain types of therapies.

Disclosure Log

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Pricing Arrangement Reference Group - Item 3.1 March 6th, 2024

Section: 4.3.

Support Coordination: About 61% participants reported satisfaction or very high with support coordinators’ assistance using NDIA payment analysis; active provider numbers continue to rise due largely from unregistered ones;

Section: Cancellations,

suggests that some providers charge up-to a short notice cancellation policy while others opt-in longer periods like 7-day,*24-hour,*or even 48-hours. Around eighty-six percent are aware their service’s policies but forty-nine suggest varied across supports;

Disability Support Worker Cost Model

The DSW cost model estimates fully loaded costs per billable hour considering six factors including base pay,direct on-costs operational overheads corporate overhead margin & temporary loading (currently at one percentage point set for cessation July first year). Feedback suggests assumptions do not reflect reality in delivery current economic landscape and greater need transparency assumption setting concerns include underestimation of overheads increased recently attributed insurance premiums regulatory compliance costs potential limitations where the model does not account services staff required by clients higher more specialized needs previously price limits were based efficient level twenty-fifth percentile parameters simplified July assumed no longer explicit publications currently considered available data time concern raised this is flawed inadequate allow providers recover costs;

Financial Data Sources

6.1.

The National Disability Insurance Agency commissioned an annual financial benchmarking survey over past years used derive parameters informing models last conducted between 2021-22;parameters somewhat dated rising living costs recent years;

Section: Sector Surveys,

surveys sector-run to capture information from disability support delivering providers includes Ability Roundtable Survey Stewart Brown Benchmarking3, however these surveys present drawbacks sample sizes smaller than previous NDIA Survey raising representativeness concerns For 2022 - Benchmarking data fifty-five providers benchmarked;

Disclosure Log

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Pricing Arrangement Reference Group - March 6th, Item: Item Number:

with Ability Roundtable representing approximately (\frac{1}{7})**%NDIS payments). The Stewart Brown June Survey had participated organizations out of which were unknown. • As current surveys are conducted within the sector there may be bias in reporting results.

Considerations For APR:

True Costs Of Service Delivery Incurred By Providers And Their Financial Bottom Lines Continue To Be Unobserved Which Hinders The Agencies’ Abilities To Make Informed Decisions. In Absence Comprehensive Database Does Not Have Sufficient Information Basis Parameter Change Outside Minimum Wage Or Legislative Changes Near Term.

Manage Expectation Public Scrutiny It Is Recommended That Agency Clear Position Through Upcoming Apr Acknowledge Assumptions Model Best Estimates Time Financial Benchmarking Data Available Over Last Two Years Disability Markets Show Healthy Growth No Evidence Supply Meeting Demand Business Entries Exits Important Dynamism Competition Has Widespread Systemic Exit Observed Market.

####### Also Recommend Since Simplified 2022 Price Limits Set At Efficient Level 75th Percentile No Longer Explicit Current Publications This Assumption Further Exploring Collaboration Dss Upcoming Framework Paper. ######## There Heightened Criticism Stakeholders Pricing Given Prices For Therapy Support Coordination Plan Management Groups Increased 4-5 Year However Benchmarked Data Relation Therapies As Well Data Relating To Entry And Exit All Providers Provided Support Decisions Previously Made.

Risks:

Reputational Risk Agency Not Having Adequate Financial Data Of Providers Creates Tension With The Sector Who Have Been Raising Concerns Costs Profitability Delivering Ndis Participants.

FOR OFFICIAL USE ONLY | —|— Pricing Arrangement Reference Group | 6 March 2024 | Item 3.1

8.2. There is a risk of incomplete information leading to inadequate prices, and therefore supply issues and in turn, participant safety risk.

8.3. There is a risk of incomplete information leading to overly adequate prices, leading to sustainability issues.

9. Impact

9.1. The APR process and setting NDIS pricing arrangements and price limits is crucial to ensuring a sustainable provider market to deliver supports to NDIS participants.

10. Next steps

10.1. The draft APR recommendations will be presented at the 9 May 2024 Board meeting.