Strict new criteria, sweeping ministerial powers: All the changes coming for NDIS

Labor’s new laws to limit who can access the National Disability Insurance Scheme will also give the minister sweeping powers to make mass cuts to budgets or therapies and enable automated decision-making, in efforts to cut spending by $38 billion in four years.

Health Minister Mark Butler’s bill to restrict who can join the $56 billion NDIS, introduced on Thursday, will require people to have exhausted all other treatment options before they are considered permanently impaired to enter the scheme and receive an individual support package.

Broad ministerial powers will allow Butler to put an instant break on certain parts of the scheme if costs start spiralling, but the minister assured participants that any automation would be carefully considered and focused on administration, as he sought to allay fears of a “Robodebt” scenario.

These laws are crucial for the government to action its NDIS overhaul and recoup around $170 billion in a decade. More than half the $64 billion savings banked in Tuesday’s budget assume the government will drastically curtail NDIS eligibility and spending within four years.

But these plans immediately hit a hurdle on Thursday when the Senate sent the bill to an inquiry, now due to report back by June. The Greens have declared their opposition and joined community campaigners fighting against the changes, meaning the government needs the Coalition’s support.

NDIS blowouts have become a major issue for the budget’s bottom line as wide eligibility criteria and loose legal limits on spending allowed it to grow more than 10 per cent a year. The overhaul aims to restore the scheme to its original purpose so that it grows at 5 per cent in future.

“The NDIS was intended to operate as a targeted, insurance-based scheme for people with permanent and significant disability,” the bill’s explanatory document, published Thursday, said.

“It is not intended to operate as an unconstrained funding source for all disability-related needs, nor should it be used to address supports that would be more appropriately provided by other service systems.”

Up to 300,000 people will be removed from the scheme to achieve this, when eligibility changes come in from January 2028. Tuesday’s budget paper show annual NDIS funding go backward to $55 billion as the changes roll out, before returning to $56.2 billion in 2029-30.

New laws reveal first steps to eligibility changes

A key purpose of the new laws is to clarify loose legal definitions that have enabled a higher-than-forecast number of people to join, acting on a recommendation from the 2023 NDIS review.

Butler’s bill says that “functional capacity” should relate to whether or not someone can perform an activity without help from other people, technology or modifications – it does not consider environmental or personal circumstances, such as their financial means or living arrangements.

It also clarifies how “permanent impairments” are defined, saying someone must have undertaken all other appropriate treatments before accessing the scheme.

“An impairment cannot be found to be permanent if there is any other treatment which is likely to materially improve, reverse, or alleviate the impact of the impairment or impairments,” the explanation says.

“This item also specifies that to be found permanent, the person’s impairment or impairments are likely to persist for the person’s lifetime.”

The laws will tighten eligibility to the NDIS if there are alternative supports or other service systems that could meet someone’s needs. These include if someone can access workers compensation or motor vehicle accident compensation schemes, affecting an estimated 8000 current participants.

“This scheme was never set up to become a substitute for health and rehabilitation and other treatment that could potentially prevent lifelong disability, so we will put in place rules that that make that much clearer,” Butler said on Thursday.

“We won’t, for example, require people with profound hearing loss to receive a cochlear implant. There will be exceptions to that question of treatment, and the detail of that will be developed.”

Finally, the laws will confirm people can only access NDIS support for needs that arise directly from the impairment for which they are accessing the scheme. This means that someone who accesses the scheme for cerebral palsy, for example, cannot get support for ADHD or dyslexia.

These legal changes will override court and tribunal decisions that have expanded the scope for who is eligible, as well as the automatic “access lists” that currently guarantee people enter the scheme with diagnoses such as level two or three autism.

A technical advisory group will give the government advice on the appropriate thresholds and assessments for eligibility, and it will be informed by community consultation.

Sweeping powers give minister control over spending

Thursday’s new laws go beyond eligibility changes to give the minister new powers to make blunt cuts or restrictions to entire sections of the NDIS, either by limiting how much money is allocated to that section, or by limiting how many supports can be accessed.

“These determinations are not applied on a ‘plan-by-plan’ basis, but rather have the effect of reducing the funding for certain groups of supports across the scheme,” the explanation said.

This measure is designed to allow the minister to “directly manage the financial sustainability of the scheme” and any changes to people’s funding as a result will not be subject to merits reviews.

Butler last month said he would use this power to cull people’s social and community participation budgets, which tripled to $12 billion in five years. He will reset funding in this part of the NDIS at 2023 levels as one way to quickly cut spending.

“I also intend to reset the therapy budgets, which on average, will mean… a shift from around 71 or 72 hours of therapy a year, down to about 68 hours of therapy per year,” he said on Thursday.

The minister will also gain powers to set prices, instead of the National Disability Insurance Agency. The government plans to pay registered providers more for the same service than unregistered providers.

Laws tackling fraud will enable a range of new civil penalties and give the National Disability Insurance Agency powers to investigate criminal activity. Providers and participants will also have to keep their records for specified periods of time, and make claims within 90 days of a support being provided.

The laws move to enable other changes that Butler announced in his National Press Club last month, such as clamping down on unscheduled plan reassessments that have been a key driver of NDIS inflation, and moving to a system where the government decides what plan managers people can use.