How the NDIS grew to four times the size that was expected

This week, Health Minister Mark Butler outlined plans for sweeping cuts to the National Disability Insurance Scheme, saying it was costing taxpayers far more than was first intended and its future was at risk without a course correction.

The claim that the NDIS is costing too much has been a feature of public debate for a while now. But it is difficult to assess without historical context.

Just how much has the scheme changed since it was conceived under the last Labor government?

Hope over experience

At the time of its conception under the Gillard government in 2012, there was little precedent for anything quite like the NDIS, either in Australia or elsewhere.

That meant that while the principle was simple — the scheme would give "reasonable" and "necessary" supports to those with "significant" and "permanent" disability — there was real uncertainty about what it would look like in practice.

A report by the Productivity Commission had outlined a model for the NDIS, imagining that it would support just under half a million people and cost $13.6 billion per year, or closer to $20 billion in today's dollars.

But as the Gillard, Rudd and Abbott governments set about implementing the scheme over the next few years, important questions about its scope were not fleshed out in sufficient detail, including who it would cover and what supports would be funded.

Martin Laverty, an NDIS architect who now heads disability services organisation Aruma, said it bluntly on ABC Radio National this week: "It was rushed and we were too optimistic."

Instead of being highly prescriptive, the federal government allowed design questions to be answered by trial and error. As the Productivity Commission observed in 2017, the rollout happened at pace as the agency scrambled to meet enrolment targets.

At first, the worry was the opposite of what it is now — that the scheme wasn't costing enough, because the agency and the disability sector couldn't get participants approved and supports in place on the timeline the government had expected.

At the time of the last Abbott budget in 2015, it was imagined the scheme would be operational in all states and territories by mid-2018 and cost $19.2 billion in its first full year. In the end, the federal government would only spend $13 billion that year.

Rapid acceleration

But not long after the scheme's rollout was complete in 2020, it became apparent that the cost and scope were accelerating.

One way to see this is by tracking participant numbers. Rather than the 550,000 expected by 2030, Mark Butler revealed this week an estimated 900,000 would be on the scheme at the end of the decade — to be reset to 600,000 under his proposal.

But the cost tells an even starker picture. At the time of the 2015 intergenerational report, Treasury expected the federal budget cost of the NDIS to sit between 0.6 per cent and 0.8 per cent of the Australian economy for decades to come.

Even using the larger figure, that would have meant a cost of around $23 billion in the coming financial year and $28 billion at the end of the decade.

Instead, by the time of the first Albanese budget, the projections for those same years were $59 billion and $100 billion, respectively. By the year 2032, the cost was projected at $128 billion — more than four times the Abbott-era expectation.

The Albanese government took a series of steps in its first term to contain this cost, but Butler made the stark admission this week that those had barely touched the sides, and that yet another multi-billion-dollar cost blowout was looming in this budget.

Under Labor's new proposal, which will see funding cut in real terms for the next four years, the 2030 cost is estimated at just $55 billion. The scale of that transformation is clearest in human terms: 160,000 people taken off the scheme within four years.

The change will also prevent another milestone that was looming by the end of the decade: that the NDIS would cost more than the entirety of Medicare and the Pharmaceutical Benefits Scheme combined.

For Butler and others in the cabinet, many of whom were part of the government that created the NDIS, that fact necessitated a radical shift to bring the scheme closer, if not all the way, to what they had imagined it would be.

But reversing a trend a decade in the making in the space of a single budget makes for a sharp and painful change that has already generated uncertainty and apprehension among those who access the scheme.