Cost reporting key to NDIS success

Managing the costs of emerging claims will be a huge challenge as the National Disability Insurance Scheme (NDIS) is rolled out beyond trial sites, says co-stream leader for the Scheme in the University of Sydney’s Centre for Disability Research and Policy, Richard Madden.

NDIS trial sites, including Newcastle, Geelong and the ACT, were rolled out swiftly after the legislation was passed but cover only three per cent of potential claimants.

“Running [the NDIS] out to the other 97 per cent of the country is a huge challenge. It is very important to look progressively at the emergence of costs and claim rates … and get into that actuarial cycle that you modify progressively as you go along to try and keep a handle on the costs,” Richard.

Bilateral agreements for the roll out of the NDIS in NSW and Victoria were signed by governments last month.

Trial sites have been running for just over two years now and scheme experience indicates that overall costs are in line with expectations: something the scheme actuaries are to be congratulated on, Richard notes.

Professor Richard Madden, a statistician and actuary, spoke at the recent International actuarial ASTIN/AFIR ERM Colloquia in Sydney, describing the NDIS as a social insurance scheme and the “biggest national reform since Medicare”.Richard Madden

“That hides many problems in how to estimate those two things in a scheme as complex in construction and coverage and the NDIS is going to be,” Richard says, “so far it’s been very simple in trial sites but it’s going to get very complex as the sites go on.”The NDIS is based on insurance principles (risk pooling; reasonable and necessary entitlement; and active outcome management) and actuarial cost estimation (summarised as claim frequency by claim size).

He emphasised the importance of long term real-time national data collection and reporting by the scheme actuary to underpin community discussion about the scheme’s progress.

“When you’ve got an entitlement scheme for reasonable and necessary supports…what does that mean and how do you [assess people] within a fiscally responsible envelope?” says Richard.

These issues have been addressed through a number of tools including reference packages (commenced in February 2015) that aim to provide an annual benchmark funding level of support for participants with similar support and characteristics.

“We don’t know enough about these packages and how they’ve been developed yet,” says Richard.

The NDIS is person-centred: it gives those with a disability the ability to choose services rather than simply taking what they can get.

“This presents marketing and funding challenges to service providers and will undoubtedly cause a big shake out in the industry,” Richard says.

It is expected that almost 245,000 Australians will ultimately be covered by the NDIS in New South Wales and Victoria.

The social insurance principles of the NDIS give it objectives to be efficient; support living standards; reduce inequality; promote social integration; and be administratively possible.

The contribution of actuaries to the NDIS has been significant with John Walsh engaged in the design and governance of the scheme and Sarah Johnson as the scheme actuary.

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