Perverse Incentives of NDIS Providers Under an Individualised Funding Model
The National Disability Insurance Scheme (NDIS) operates under an individualised funding model, aiming to provide participants with tailored support based on their unique disability-related support needs. This model offers significant benefits and is far better than the previous funding model. It removed caps, rationing and differences in funding between states that were part of the previous model. Along with the advantages, this model can also create perverse incentives for providers to maximise funding rather than maximising independence. Here are some key issues that need to be considered regarding perverse incentives that currently exist in the NDIS funding model:
1. Maximising Service Volume
Under the fee-for-service payment approach, providers are paid for each unit of service delivered, which can incentivise providers to maximise the volume of services they deliver, regardless of whether these services benefit the participant. This focus on quantity over quality can lead to:
- Over-servicing: Providing more services than necessary to increase revenue, which can lead to participant fatigue and a reduced focus on their actual needs.
- Service Duplication: Offering similar services multiple times without adding value to the participant’s outcomes.
2. Prioritising Profitable Services
Providers may prioritise services that are more profitable rather than those that participants most need, which can result in:
- Neglect of Essential Supports: Essential but less profitable supports may be underprovided.
- Focus on High-Margin Services: Providers might focus on services with higher profit margins, even if they are not the most effective for the participant.
3. Limited Innovation
The current payment model can discourage innovation in service delivery. Providers may stick to traditional methods guaranteed to be funded rather than exploring new, potentially more effective approaches. This effectively stifles the development of innovative supports that could better meet participants’ needs.
4. Inequitable Access
Participants with more complex needs may find it harder to access the support they require. Providers might prefer to serve participants with less complex needs, as these cases are often easier and more cost-effective to manage, leading to inequitable access to services for those who need them most.
5. Pressure on Scheme Sustainability
The focus on maximising service volume and prioritising profitable services can place pressure on the overall sustainability of the NDIS. If resources are not used efficiently, it can lead to increased costs and reduced availability of support for all participants.