Can Labor fix the NDIS?
rather than picking the low hanging fruit of NDIS fraud, bill shorten should focus on meaningful reform of the scheme that he helped create. BY NIck Cater.
Putting the Liberals in charge of the National Disability Insurance Scheme is like expecting a duck to play a Stradivarius violin, Bill Shorten told the National Press Club two years ago. A Stradivarius being the most expensive fiddle on the market, the metaphor wasn’t entirely misplaced.
The cost of the NDIS has blown out by $8.8bn in the last federal budget, which is roughly the cost of a Virginia-class nuclear-powered submarine. And while it is undoubtedly better than the inequitable, under-funded and fragmented system that it replaced, fraud, rent-seeking and inefficiencies are rife.
Shorten was given the chance to fix the system he helped create when he was appointed Minister for the NDIS last June. His first 285 days in the job have hardly been encouraging. He has grasped the low-hanging fruit by ramping up criminal investigations into fraud. The amount being defrauded is not trivial, neither is the heinous nature of the crime. For the most part, the victims of theft are the disabled who are defrauded of benefits they should be receiving.
The biggest flaws, however, are far more intractable. They lie in the complexity of the scheme itself and the heroic task it has been assigned: easing the daily friction faced by hundred of thousands of Australians one life at a time.
If it is to succeed, the NDIS must overcome the so-called “Sturgess’s Law” – namely that the processes employed for the procurement of paperclips are not appropriate for commissioning complex frontline human services.
The Australian’s recent investigation into the diagnosis of autism serves as a case study.
As Stephen Lunn reported earlier this month, private providers are charging parents more than $5000 for an autism diagnosis to secure a place on scheme, the cost being justified as a guarantee of funding for life.
Sylvana Mahmic, an NDIS Independent Advisory Council member, told Lunn: “Everywhere you go, the NDIS provider is trying to capture the funding, and the bigger the package, the harder they are trying.”
The hazards of false incentives and perverse consequences are hardly new. They lead to provider capture, the phenomenon that ensures that those who administer a government scheme are its primary, and sometimes only, beneficiaries.
The NDIS shares the faults common in the private provision of government services, such as employment. Providers naturally gravitate towards the easiest forms of service: those that involve fewer hours and patience to deliver; those that are easily commoditised and deliver comfortable margins.
It has become known as “creaming and parking” – creaming a quick profit from the easy jobs, while parking the rest in the too-hard basket.
Creaming and parking is almost as old as the outsourcing of government services itself. The transport of convicts on the Second Fleet in 1790 was contracted to the lowest bidder in a competitive tender, who happened to be a slave trader. The contract was paid at a flat rate per convict embarked, with penalties for delays. The contractor creamed off the profit by packing the prisoners into boats shoulder to shoulder, chained to the boards with leg-irons. They skipped stops where fresh food could have been loaded to deliver their cargo to Australia in record time. The contractor had no incentive to keep prisoners alive, however. Quite the opposite, as rations not consumed by the dead could be stored and sold on arrival. About a third of the convicts died.
As public policy academic Gary Sturgess observed in his 2017 study of the mortality rates on convict ships, the quality of the service delivered is determined by the framing of the contract.
Government-approved surgeons assigned to later fleets were awarded bonuses for each healthy prisoner landed, leading to a dramatic decrease in mortality rates.
Improving the quality of complex human services such as the NDIS is a far more difficult challenge. The problem of creaming and parking is compounded by a shortage of trained staff. Turnover in service provision is rapid, leading to discontinuity and lack of corporate knowledge.
Basic daycare services are typically delivered by staff on the minimum wage, giving providers a healthy mark-up on the $50-an-hour plus weekend penalty bonuses they can claim back from government. Rates in rural and remote districts are higher still.
Throwing money and hoping that some sticks, the technique Labor employed to try to fix schools, clearly isn’t the answer. No government service has ever been blessed with the open-ended commitment to spend as much as it takes that was given to the NDIS at its birth. It’s not the cost of the service that ultimately matters but its value, which is far harder to calculate, let alone ensure.
Since the needs of no two participants are the same, there is no obvious common metric to measure if they are receiving value for money.
Theoretically, NDIS participants have the power of consumers in the marketplace. If they are not getting value from one provider, they can take their business elsewhere.
For most recipients, however, switching between NDIS providers is not like switching from Pepsi to Coke. The NDIS is a classic example of a muddleopoly. Those who try to exercise choice can quickly find themselves entwined in the thicket of bureaucracy with scant market information.
We can only hope the NDIS review Shorten has commissioned will further illuminate the complex dynamics of this government-designed, government-run faux-market that depends on government capital and government price control.
The pretence that it is an insurance scheme in anything but name was abandoned long ago. It stemmed from the theory that individuals would be assessed according to their lifetime needs, encouraging early intervention and prioritising services that would help participants overcome their difficulties, rather than merely servicing their day-to-day living.
There has been some encouraging data showing that this is happening at the margins, notably with improved rates of workplace participation.
Yet with both the number of participants and the cost of the packages soaring well above predictions, it is hard to find evidence of the long-term savings we were told to expect.
“The NDIS could only have been created by a Labor government,” he bragged. “And as we are discovering, it can only be run properly by a Labor government.”
The first claim is not in dispute. Delivering on the second will require more political courage than is so far apparent.