The National Disability Insurance Scheme is facing its most significant reforms yet as the Albanese government moves to curb spiralling costs that threaten to overwhelm the programme. Health minister Mark Butler this week announced a sweeping overhaul that will tighten eligibility, introduce mandatory functional assessments and cut an estimated 160,000 participants by 2030, in a bid to save the A$50bn scheme from collapse. The changes are projected to reduce federal spending by A$35bn over four years, a stark intervention that the government says is necessary to return the NDIS to its original purpose.
Government targets unsustainable growth
Butler told the National Press Club on Wednesday that without drastic action the scheme was on track to cost A$70bn by the end of the decade. He blamed the cost blowouts and fraying public support on a combination of design flaws and implementation failures, including a lack of regulation that turned the NDIS market into a “free-for-all” and made it vulnerable to exploitation, including by organised crime groups. In a startling admission, Butler revealed that about 600,000 invoices – or 90% – were submitted each day by plan managers or service providers without supporting evidence.
Under laws to be introduced to federal parliament next month, every participant will be subject to “evidence-based” independent assessments of their impairment to determine eligibility. Existing participants will have their eligibility reassessed as their plans come up for renewal. The government will also create a digital payment scheme to provide greater visibility over claims and mandate registration for more categories of providers, including those providing personal care and daily living support. Currently, just 6% of the roughly 277,000 providers are registered, according to the latest NDIS quarterly report.
The original vision: a promised tiered system
To understand why the reforms are so drastic, it is necessary to revisit the scheme’s origins. The NDIS was born from a landmark 2011 report by the Productivity Commission, which described the old patchwork of state-based disability services as “underfunded, unfair, fragmented, and inefficient”. The commission recommended a new model: a national insurance-style scheme that would fund tailored supports for 410,000 people with permanent and significant disabilities, at a projected annual cost of about A$13.5bn when fully operational. Critically, the report also proposed a second, more basic system of support – known as tier 2 – for the roughly four million other disabled Australians who would not meet the criteria for personalised packages. The commission said the benefits would “significantly” outweigh the costs, giving people certainty that if they or a family member acquired a significant disability, there would be a properly financed, comprehensive system to support them.
The scheme was legislated in 2013 with bipartisan support – a rare moment of political unity that David Bowen, the first chief executive of the agency in charge of the NDIS, doubts would have been possible had either side known what it would become. “Had any government, of any political persuasion, known it was going to be this size, by this time, it would have never been funded in the first place,” Bowen said.
How the NDIS outgrew its original design
The pyramid of disability supports envisaged by the Productivity Commission was never constructed. Instead, the establishment of the Commonwealth-run NDIS prompted states and territories to withdraw funding from their own disability programmes, leaving the NDIS as the primary – and often only – source of support for people with disabilities. “What essentially happened was that the scheme became, as people like to say, the only lifeboat in the ocean,” said Emma Bennison, the chief executive of Disability Advocacy Network Australia. Missing were the foundational supports that would have helped those with milder needs, funnelling more people into the NDIS than originally intended.
The result has been explosive growth. Participant numbers have ballooned from the anticipated 410,000 to 760,000, with projections that they could reach 900,000 by 2030 without intervention. The financial trajectory has been equally dramatic: the scheme was originally designed to cost A$13.5bn a year at full rollout; it now stands at A$50bn and was on course to hit A$97bn within a decade, according to the prime minister’s office.
The reasons for this cost blowout are multiple, but several factors stand out. First, the eligibility process has not worked “as intended”, Butler said, allowing entry based on an individual’s diagnosis rather than the extent of their functional impairment. That feature will be reversed under the new reforms. The most dramatic example of this is the growth in participants with autism, who now account for 324,200 people, or 43% of all participants. David Bowen said that during the trial years of the scheme, a diagnosis of autism alone was not the basis for eligibility. That changed some time after his retirement as NDIA chief in 2017 – a decision he said “broadened the scheme incalculably”.
Second, the lack of regulation created a market ripe for exploitation. In addition to the huge volume of unsupported invoices, Butler pointed to the quality of some supports and a general lack of guidance. “We get report after report … from participants who’ve been taken out, for example, to a food court by a support worker … and the support worker then spends their time scrolling on their phone,” he said. “That’s not community participation.” The government plans to scale back funding for social participation activities and supplement it with a A$200m Inclusive Communities Fund for disability community groups and mainstream sports clubs.
Third, the principle of “choice and control” – a cornerstone of the NDIS that allows participants to choose their own providers – has made it difficult to regulate the market. Mandatory registration has long been resisted by some in the disability community who see it as undermining that autonomy. But David Bowen argues it is a necessary measure for integrity, drawing a comparison with Medicare: “In Medicare, you can choose your own doctor, but you can’t say, ‘I’d like the money we give to the doctor and I’ll go and spend it on an alternative health service,’ you can’t do that. And the NDIS should operate the same.”
A political journey from cross-party support to cross-party disputes
The NDIS was a Labor vision brought to life with the Coalition’s blessing, an act of rare bipartisanship. But the politics of the scheme have shifted markedly. In 2021, Scott Morrison’s Coalition government proposed its own form of independent assessments, requiring participants to undergo a mandatory three-hour interview with a government-contracted health professional. That plan was abandoned after a fierce backlash from disability advocates, Labor and state and territory governments. During the 2022 election campaign, Labor campaigned to “defend the NDIS” and questioned the Coalition’s cost blowout warnings.
After returning to power, Labor changed its tone. Bill Shorten was installed as NDIS minister – a role that put him in charge of a scheme he helped design as a junior frontbencher in the Gillard government. He tapped Bruce Bonyhady, another scheme architect, to lead a sweeping review that recommended finally establishing the system of disability supports outside the NDIS that the Productivity Commission had originally proposed. By then, Anthony Albanese had secured agreement at national cabinet for an 8% annual growth target for NDIS costs – the first time such a target had been set. Almost exactly three years on, Butler announced a revised target of 2% annually until 2030, after another A$13bn cost blowout.
The government has also launched the A$4bn “Thriving Kids” programme, jointly funded with states and territories, to divert children under nine with mild developmental delays and autism from the NDIS into earlier, more accessible support outside the scheme. Children with permanent and significant disabilities or those aged eight and under with high support needs will remain eligible.
Anxiety grips the disability community
For the 760,000 current participants, the reforms have created a climate of uncertainty. Emma Bennison said the disability community was “racked with anxiety” as it awaited detail on what comes next. “I think people are also feeling like they’re being heralded as a burden on society. It feels really not very nice to be a disabled person in Australia at the moment,” she said. Greens Senator Jordon Steele-John described the decision to cut participants from the scheme as “terrifying”, warning that individuals would be left to “fend for themselves” and that the core principle of choice and control was under threat. The reforms are expected to be the subject of intense parliamentary debate when the enabling legislation is introduced next month.