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Earlier this month the NDIA released the final element of the Specialist Disability Accommodation (SDA) Pricing Review process – the SDA Pricing Review 2022-23 Demand Projections Report. As the name suggests, the Report provides demand projections for SDA both in terms of geographic locations and design categories. It goes through to 2042. This is the very first time this type of data has been released by the NDIA, but there are some VERY important things to note before getting too excited.
Let’s explore more.
SDA Demand Model Assumptions
At the heart of the demand forecast model is a population distribution approach. This is not uncommon for SDA demand forecasts, and is a sound approach, despite being unable to account for people moving across geographic boundaries to access SDA in a desired location. The forecasts are also based on the Scheme Actuary’s projections on the number of future participants - which again is a logical assumption.
However, it’s really important to note the assumption that the “The long-term propensity for an existing NDIS participant with a given demographic and disability profile to be in SDA is aligned to the modelled propensities”.
In other words – the forecasts assume that the current scale and profile of people with SDA is a true reflection of the true number of people currently eligible for SDA, and that these people are in the right design category of SDA. For this assumption to be sound, there would be very few situations where people are challenging their SDA eligibility outcome. A quick check on requests for reviews and even AAT matters, suggests this assumption may not be as sound as the others.
The Data
The demand projections are provided for 2022, 2027, 2032, 2037 and 2042. And the data is presented by SA4 region, which is a geographic area used by the Australian Bureau of Statistics. It includes the total number of SDA places (a place is a bedroom, not an entire dwelling), and the mix of design categories in 2042.
Yes, you read correctly, there is now an estimate by SA4 region of how many places will be needed in Improved Liveability, Fully Accessible, Robust and High Physical Support. There is also further information on how the mix of design categories may change over the next 20 years (refer to exhibit 4 of the report).
Whilst this sort of detail has been highly sought after for many years, we need to be extremely cautious about how accurate the projections are.
For example, in numerous SA4 regions the 2022 SDA numbers are less than the actual numbers reported in the 4th Quarterly Report for 2021/22 and/or have already been exceeded by the Quarter 4 2022/23 data. Any model is going to have some variance, but it is concerning that in some cases the baseline data which further projections are made off, appears to be flawed.
Of more fundamental concern is the mix of design categories, both in 2022 and throughout the projection periods. Firstly, they are based upon the assumption that every SDA eligibility decision to date has been correct in terms of design category. It is common knowledge within the SDA and broader Home and Living markets that this assumption is flawed. This can be evidenced by the high number of decision challenges and AAT matters involving SDA design categories.
Further, 50% of the current cohort of people with SDA have transitioned from previous state and territory systems, many of whom have received a nominal SDA eligibility in accordance with the transition provisions. Many of these people may or may not be SDA eligible within the current requirements and many are likely to not have the correct design category reflected in their current plans. This alone has significant possibility of skewing the baseline data.
To derive relative percentages the projection report has grouped disability types in a different way to other NDIS data which is obviously to try and align disability types with SDA design categories. However, this approach ignores secondary diagnosis, information which is not uncommon to drive a different SDA design category outcome. This is another limitation of the projections.
A final concern with the model is that the projection starts from the 2022 baseline of 22,873 people with SDA. The original SDA forecast was 28,000 people, and this was based upon an estimate at the birth of the NDIS of 6% of participants being eligible for SDA at full rollout. Now, this model projects that by 2042, 36,684 will have SDA funding. When compared to the Scheme Actuary projections, this suggests that the 6% has been reduced to a little over 4%. There is no explanation or acknowledgement of this.
When should providers rely on the projections data?
Projection models can never take the place of on-the-ground local knowledge. The projected demand data could confirm a provider’s local understanding of the number of SDA places in a given SA4, but the data also should be checked against the Quarterly data to ensure there is some alignment. Where alignment does not exist, on-the-ground knowledge should always be relied upon first and foremost.
We consider the projected mix of design categories, whilst being welcomed as a first release of such data, to have significant limitations due to the assumptions underpinning the data. We would not recommend relying upon it to any great extent at this point in time.
In Summary
The outcomes of the SDA Price Review 2022/23 have the potential to significantly bolster the SDA market. However, the Demand Projection report, whilst being welcomed as an attempt, contains underlying flawed assumptions, especially around the baseline make-up of SDA eligible participants.
We would recommend only a high-level consideration of this data and not relying on it to inform investment decisions.
