Ministerial Submission

Office: Minister for the National Disability Insurance Scheme Subject: 2023-24 Annual Pricing Review Recommendations PDR: MS24-000054 Critical date: 30 June 2024 History: Nil Consultation: Contact officer: Kee Hiaujoo, Branch Manager, Economics and Pricing, Partners, Providers and Home and Living Comments:

Ministerial Submission for Action

For: Minister for the National Disability Insurance Scheme | Critical date: 30 June 2024 | Reason for urgency: Public release prior to the 2024-25 financial year

2023–24 Annual Pricing Review Recommendations

Key Issues:

The National Disability Insurance Agency (NDIA) Board has agreed an approach to the 2023–24 Annual Pricing Review (APR) which has three elements – Releasing the APR which has been completed by the NDIA and NDIA Board endorsed on 9 May; commencing a review of the NDIA’s approach to pricing review for 2025-26; and announcing a ‘provider of last resort’ strategy which the NDIA is working on.

It is recommended that you write to the Treasurer and the Minister for Finance about the above approach to the APR. A draft letter is in Attachment A.

The APR intersects with the Smith and Donnelly report on workforce employment. A separate brief will be provided to you on the points of intersection.

Recommendation(s): Decision:

That you:

Note the 2023-24 Annual Price Review Report | Noted? Please discuss
Agree to announce an eminent person led - review of the NDIA’s approach to pricing for 2025-26 | Agreed/ Not Agreed
Agree to announce a Quality Supports program | Agreed/ Not Agreed
Sign the attached letters to the Treasurer and Minister for Finance regarding the proposed approach to the Annual Price Review | Signed / Not signed

Media Considerations:

Release of the 2023–24 APR Report is likely to attract strong criticism from peaks and providers who claim the price limits are making quality businesses unviable and will lead to market exits.

The Fair Work Commission (FWC) pay increase determination of 3 June 2024 is factored into the new price limits. However, the APR Report will result in a termination of the 1% loading that providers currently receive. There have been no price limit increases for therapy supports since 1 July 2019, and support coordination (level 2 and 3) and plan management since 1 July 2020. There have been substantial representations made from service providers and peak bodies for increases to these price limits throughout the consultation period. The decision to not increase some NDIS price limits is likely to result in negative reactions from the sector.

Given the impact on the forward estimates is relatively minor ($68m) the 2023–24 APR Report is unlikely to attract media attention in relation to Scheme sustainability and the 8% growth target.

Signed by Minister:

Signature: WN | Signature: Bill Shorten

OFFICIAL: Sensitive Page 7 of 352

OFFICIAL: Sensitive

MS24-000054 Minister comments

Cleared by:	Contact:
Penelope McKay, Deputy CEO, Partners, Providers and Home and Living	Kee Hiaujoo, Branch Manager,
Economics and Pricing, Partners,
Providers and Home and Living
M: `redacted` (s47F - personal privacy)
Signature:	M: `redacted` (s47F - personal privacy)
Date cleared: 13 June 2024

Sensitivity: Yes

Current pricing models present several sensitivities for the NDIA. The Disability Support Worker (DSW) pricing strategy, initially designed to encourage market entry and efficiency, is currently due for a reassessment for the current state of the sector. The NDIA faces a reputational risk due to insufficient financial data on providers to inform the current setting of DSW supports.
Current pricing and data limitations restricts ability to consider quality or outcomes. Despite the potential move of the pricing function to the Independent Hospital and Aged Care Pricing Authority (IHACPA), the NDIA remains accountable for the 2024—25 Annual Pricing Review. The NDIA should collaborate with stakeholders to improve the current pricing approach and develop a new DSW Cost Model using objective data for improved pricing accuracy for current state.
A coalition of provider representative organisations, including National Disability Services (NDS), Alliance20, Ability First Australia, and Allied Health Professionals Australia, has called for a 10% immediate increase in prices for disability support, therapy, and intermediary services in their joint statement ‘Pricing for a Sustainable Quality-Driven Sector’. This would lead to an increase of approximately $3 billion in 2024—25 and $13 billion over a 4-year period.
The sector could react strongly to the recommendations of this APR as supports such as therapy (except for psychology) and support coordination Level 2 and 3 will not be indexed. This could lead to a decrease in services or market exits that consider current NDIS price limits insufficient for their business operations.
The targeted transitional pricing support for providers of last resort (Quality Supports) is a targeted measure and could lead to negative reactions from the sector. This selective approach could foster dissatisfaction among excluded providers, creating a perception of inequity and potentially prompting service reductions or market exits due to unmet financial needs.

Financial Impacts: Yes

The overall impact of the recommendations on Scheme expenditure is estimated at $11 million in 2024—25 and $59 million over the forward estimates. This estimate implements the National Minimum Wage (NMW) decision of 3.75%, the Superannuation Guarantee increase of 0.5%, and the removal of the 1% temporary loading from 1 July 2024.
The NDIA had modelled, in its forward estimates, a NMW decision of 3.75%. Consequently, the NUW determination announced on 3 June 2024 had no financial impact on the NDIS forward estimates.
Extending the temporary 1% loading for an additional year would cost about $350 million in 2024—25.
Other financial changes include the phasing out of the Temporary Transformation Payment (TTP) from 1 July 2024, which is already accounted for in Scheme forecasts with no additional financial impact.
The recommendation relating to psychology results in additional expenditure of $21 million in 2024—25 and $94 million over the forward estimates however this increase is largely offset by assumptions in the forward estimates regarding increases for allied health.
Increase the price limits for nursing and other supports, not covered by DSW related supports in line with the weighted movement noting this will have a financial impact of $10 million in 2024—25 and $47 million over the forward estimates.

Regulatory Implications: No

OFFICIAL: Sensitive

MS24-000054

Consultation: Yes

As part of the 2023–24 APR, extensive consultations have been undertaken, including:
- Consultations with participants, providers, peaks and other stakeholders through a public consultation process.
- Consultations with other government insurance and funding schemes.
- Consultations with the Pricing Arrangements Reference Group which consists of five independent experts from various industries.
- Consultations with the Pricing Interdepartmental Committee with membership from the Department of Social Services (DSS), Department of Finance, Treasury as well as the NDIS Quality and Safeguards Commission.
- Consultations with the Department of Veterans’ Affairs and the Chief Allied Health Officer.

Attachments:

A: Draft letter to The Hon Dr Jim Chalmers MP and Senator the Hon Katy Gallagher B: APR Terms of Reference C: 2023–24 Annual Pricing Review Report

Background:

The APR consultation concluded in March 2024. This year, a total of 912 submissions have been received through the APR consultation process. Of these, 559 submissions were in response to the Participant Consultation, with 353 in response to the Provider Consultation. The Terms of Reference for the APR is in Attachment B.

APR recommendations are based on research, statistical analysis, and pricing benchmarking. Market concentration was examined through business entry and exit rates, focusing on business inactivity for DSW, therapy, and support coordination. The full APR report is in Attachment C.

This year’s pricing review is a ‘minimalist’ approach. Key recommendations from this year’s APR are:

From 1 July 2024, the Agency will pass on in full the FWC National Minimum Wage Decision and superannuation guarantee increases to DSW-related supports. Supports such as psychology and Other non-SCHAD support are recommended to be indexed in line with the Wage Price Index (WPI) and Consumer Price Index (CPI).
The temporary loading, as well as the Temporary Transformation Payment, will both end on 1 July 2024.
There will be no increase in price limits for therapy (other than psychology), Level 2 and 3 Support Coordination. Plan Management is not part of the APR this year due to the recommendations from the NDIS Review.
Maintain the current 7-day short notice cancellation policy for DSW related supports. Adjust the 7-day short-notice cancellation policy for non-DSW related supports to two clear business days.

The APR recommendations this year are targeted, seeking to establish immediate support, market stabilisation and refresh future pricing model to remediate current limitations in price limit setting:

The NDIA will commence work on revising the approach to pricing review for 2025–26 through commissioning an external consultant. This could include developing a revised DSW Cost Model for DSW-related supports. This stream of pricing refresh work is proposed to be led by an eminent expert with strong economic credentials and disability background. This will be done in consultation with IHACPA and DSS to ensure consistency with future pricing directions.
Until the new pricing approach is developed, the NDIA intends to create a transitional pricing strategy for providers of last resort, who are experiencing significant financial hardship. This is aimed for a small group of providers that provide high quality support to participants that is crucial for participants in terms of service continuity. The program will be referred to as the ‘Quality Supports’ program.

It is recommended that you write to the Treasurer, The Hon Dr Jim Chalmers MP, as well as the Minister for Finance, Senator the Hon Katy Gallagher to brief them the recommendations of the APR as well as that financial impact of the recommendations.