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Providers were left reeling after the release of the latest NDIS Pricing Arrangements and Price Limits (PAPL) which saw a price freeze for the 5th year in a row for support coordination, plan management and most therapies. While the NDIA did uplift prices to cover the increase to the Award for core support disability support worker (DSW) services, it fell short of the boost needed to cover rising costs. In real terms, many providers view this PAPL as a price cut. So, what is the NDIA’s thinking behind this? Let’s dive into the Annual Pricing Review to uncover the logic behind the NDIA’s most unpopular PAPL to date.
In order to monitor and review the appropriateness of price controls, the NDIA undertakes an Annual Pricing Review (APR). Each year providers, participants and relevant stakeholders are invited to give their input on how well the price controls are working. The focus for this year’s APR was on DSW supports, therapy, support coordination and cancellations. Two consultation papers and an online participant survey were released in January to stimulate the discussion. Stakeholders put significant resources into responding to these APRs in very short timeframes, so the expectation for the NDIA to listen and respond is high.
This APR received a whopping 912 submissions, up from 304 last year. While there was a moderate increase in the number of submissions to the provider consultation paper (353) the significant increase in submissions came from participants. Because for the first time the APR had a dedicated participant consultation paper and online feedback form. The APR also consulted other government insurance and funding schemes, the Pricing Arrangements Reference Group, the Pricing Interdepartmental Committee, the Department of Veterans' Affairs and the Chief Allied Health Officer.
What providers said
Of those that responded to the APR’s questions about economic conditions, business risks and staff vacancies, almost all reported increased costs. In fact, 64% of provider respondents identified financial sustainability as their primary business risk, with many expressing concern about their ongoing financial viability. Many businesses report operating at a loss, increasing the risk of market exit.
Providers said costs are rising due to increased wages in a highly competitive labour market, with skyrocketing insurance, rent, travel, utilities, and other operating expenses. Providers said this impacts quality of service, as they are forced to reduce investment in staff training and other quality-enhancing initiatives to stay viable. High staff turnover was reported with staff vacancies ranging from less than 5% to more than 50%.
Peak bodies raised concerns about the costs of NDIS registration forcing members to consider de-registration. Professional bodies reported administrative burden, financial sustainability, NDIS uncertainty, professional burnout and delays in receiving payment for services relating to assistive technology as key risks.
What participants said
Participants, families, carers, and participant advocacy groups were invited to respond to the participant consultation paper and survey. The NDIA received 559 responses, mostly through the online survey. Over 85% of participants who responded were self-managed or plan-managed. About 42% of participants indicated that NDIS prices are reasonable, 51% disagreed that prices are reasonable and 7% were not sure.
38% of respondents reported that their service providers had told them that the price caps are actually NDIA set prices, rather than limits. Participants who discuss and agree on prices with their provider are reportedly much more likely to agree that prices are reasonable (71%). Participants who said their provider tells them the NDIA sets the price are much less likely to agree that prices are reasonable (20%). The APR says it will share these learnings with the relevant taskforces (yes there’s a few) to ensure that providers are giving correct information to participants about their rights and the role of the NDIS price limits.
Disability Support Worker (DSW) Cost Model
The NDIA uses the DSW Cost Model to set price limits for DSW-related supports. It is the model used to determine the hourly price or unit of service. It includes an estimated base salary, aligned with the Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS Award), shift loadings, superannuation and leave entitlements, operational overheads like supervision and training, and corporate overheads. This model is designed to reflect the cost of an “efficient provider”. What is an efficient provider you say? The NDIA sets prices based on the performance of the 25th percentile. This is the cost level that one in four providers are operating at or below, which the NDIA considers to be a reasonable target for other providers to achieve.
Almost all provider submissions argued that their actual costs exceed the DSW cost model assumptions. Only 2 of the 79 submissions from providers thought the model’s assumptions were about right. Most providers felt the NDIA underestimated the cost of workers compensation and insurances, utilisation assumptions, the impact of casualisation (and in some instances agency staff), general operational overheads, and quality and safeguarding activities.
National disability benchmarking platform, Ability Roundtable provided its Financial and Workforce Benchmarking analysis undertaken in conjunction with 63 registered NDIS providers. The average profitability was reported at -2.1%. Over 60% reported three years of consecutive losses. Ability Roundtable data shows a 10.9% variance between the DSW Cost Model and the actual cost to deliver support.
All sounds pretty compelling right? Well, the APR says the provider market has actually experienced significant growth. In the six months to December 2023, 44% of active NDIS participants accessed DSW related supports, a 12% increase from the same period in 2022. There was also a 21% increase in the number of active providers. While the APR recognised that the number of registered providers has declined, it says there is an increase in overall payments. Unregistered providers continue to experience substantial growth in both numbers and payment amounts. The NDIA says this highlights a growing market that continues to meet increasing demand. Curious praise at a time the government is pushing for increased regulation and mandatory registration. It also doesn’t indicate which providers are actually profitable.
The APR says the NDIA is actively enhancing the DSW Cost Model by integrating more robust and diverse data sources. This includes partnerships with industry stakeholders to undertake benchmarking and by accessing mandatory financial reports submitted to the Australian Charities and Not-for-profits Commission (ACNC). However, the APR says it currently lacks sufficient representative data of the NDIS provider population to support a structural change to the DSW Cost Model. The APR points to pricing reform work that is currently underway with the Department of Social Services and the Independent Health and Aged Care Pricing Authority (IHACPA).
On this basis, the APR decided it was only appropriate to pass on the increase to the SCHADS Award and superannuation for prices based on the DSW Cost Model. Despite substantial feedback on increased cost pressures, they made no changes to on-costs or overheads. The APR also recommended removing the temporary loading as it was a short-term measure to assist providers managing COVID-19 and SCHADS changes. The Temporary Transformation Payment (TTP) has also ceased.
Therapy
The APR received 178 provider submissions and 142 survey responses from participants on therapy. About 87% of providers reported an increase in the cost of delivering therapy including wages, recruitment and retention costs. Rising business expenses such as higher rents, utilities, office supplies, insurance, workers compensation premiums and travel expenses were widely reported.
Ability Roundtable submitted an updated Allied Health Cost Model for NDIS-funded services, developed with Deloitte Access Economics. The model estimates the service costs of 13 large therapy providers and shows a 12.9% shortfall between the current 2024-25 NDIS Price limit and the actual cost to deliver an hour of therapy for the four major allied health disciplines. For Psychology, they modelled a 16.6% shortfall.
Allied Health Professionals Australia argued that the price limits for therapy should be raised to reflect cumulative indexation since 1 July 2019 and called for price limits for therapy supports to be automatically indexed from 2025.
Price differentiation was also explored. Some providers reported charging non-NDIS participants the same fees as NDIS participants, others charge more for NDIS participants and some charge less. Reasons for charging different prices varied. Some providers reported NDIS participant complexity or additional administrative costs (in particular report writing) as a reason for charging more. For those that charge less it was generally because the price limits hadn’t increased in comparison to market rates.
The APR says the therapy market continues to grow significantly. From June-December 2023, 59% of active participants received therapy supports through their plans. During this period, the number of providers delivering therapy grew by 14% from the previous year. Payments made to unregistered providers increased by 60%, although registered providers still received 65% of all payments.
As the NDIS therapy market operates similarly to a deregulated or private market, the APR says other government schemes and the private billing market act as suitable comparators in setting price limits. The APR’s analysis showed that NDIS price limits remain consistent with the majority of therapies provided across these schemes. This rationale however, does not address concerns raised by therapy providers of the increased complexity and specialisation required to support people with complex needs. Nor does it address the increased administrative burden of operating in the NDIS. But the APR did concede that the NDIS price for psychology was significantly lower than the wider market. As such the APR recommended a price increase in line with the ABS Wage Price Index (WPI) and ABS Consumer Price Index (CPI). In summary, the WPI is the Australian Government’s assessment of how much wages and salaries have gone up, and CPI is the assessment of how much the cost of goods and services purchased by households has increased.
Support Coordination
55 providers made submissions relating to support coordination, as did a small number of provider peak and professional bodies. Most support coordination providers reported an increase in the cost of delivering services including rising operating costs (such as wages, rent, fuel and insurance). Yet NDIS price limits for support coordination have remained stagnant for five years. Many providers reported difficulty in attracting and retaining suitable staff. There is pressure to increase wages to keep up with the rising cost of living and to remain competitive with comparable positions in similar industries.
Several providers reported undertaking necessary but unbillable work, including onboarding new clients, PACE transition and administrative activities when a participant dies. Peak bodies raised concerns about the current price limits constraining the quality of support coordination and not sufficiently accounting for the amount of non-face-to-face time support coordinators incur.
The Health Services Union noted that the NDIS Review has recommended phasing out support coordination and introducing navigators. But said until then, a transitional increase to support coordination price limits was critical to ensure support coordinator wages keep up with inflation and increased costs.
Just like with DSWs and therapy, the APR said the market shows strong growth. From June-December 2023, there was an 18% increase in payments, compared to the same period in 2022. The APR says the market includes a mix of registered and unregistered providers, showing a market that is decreasing in concentration.
The APR says satisfaction with support coordinators varies. Positive feedback highlighted the crucial role support coordinators play in navigating NDIS processes. While criticisms tend to focus on issues like high turnover of support coordinators and inconsistency in service quality. The APR said feedback from stakeholders suggests ongoing adjustments and evaluations are necessary to align the services with the evolving needs of participants and the operational realities of being a provider. Funny, some might consider that increasing the price could also be a useful tool in raising quality and reducing turnover.
The APR says given the significant reforms recommended by the NDIS Review regarding navigators, “there is a strong rationale to mitigate potential market disruptions during this transformative period. Any changes to pricing at this point of time would be up for further changes until the reforms in the intermediary sector settle.”
I read this several times to try and paraphrase but I couldn’t quite translate so I’ll leave that rationale with you to mull over.
Cancellations
A significant part of the APR is dedicated to cancellations. While DSW related services can continue to charge for short-term cancellations with 7 days’ notice to align with the Award, non-DSW related services have been reduced to 2 clear business days. It’s not as simple as it sounds though, we expect this to have a significant impact on providers, so we are about to launch a dedicated 1 hour workshop to help you get your head around the changes.
Provider viability continues to be a growing concern and we hear many providers are considering de-registration. The Australian Government has announced $5.3 million in 2024–25 to undertake preliminary work on the NDIS pricing function reforms to strengthen transparency, predictability and alignment. No doubt, for many providers this reform can’t come fast enough.
