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State and federal governments have been handed a fix to the National Disability Insurance Scheme that won’t cost extra money, with a blueprint that says diverting funds from the scheme to a new psychosocial support service would pull 230,000 Australians with severe mental illness out of limbo.
As health ministers this week resume negotiations on a hospital and disability funding deal that has evaded state and federal governments for two years, policy think-tank the Grattan Institute says they could redirect $2 billion from the NDIS each year to a new scheme that would cater to four times as many people.
The Grattan Institute reports there are 130,000 Australians with psychosocial disabilities struggling with little support outside the NDIS.Credit: Marija Ercegovac
It would help solve one key element of the deal: finalising arrangements for a joint new disability system called “foundational supports”, which the states and Commonwealth agreed to in 2023, to establish services for children and people with psychosocial disabilities outside the NDIS.
The Grattan report singles out the inefficiency of the NDIS spending $6 billion of its $47 billion budget last year to support 66,000 people with psychosocial disabilities – regarded as severe dysfunction caused by mental illness – with an average package of $89,000 per person.
At the same time, it estimates there are 130,000 Australians with psychosocial disabilities who are struggling in limbo, homeless or in hospital as they lack assistance while reforms are delayed.
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“Most people with psychosocial disability receive no support from the NDIS or the mental health system – including about 130,000 adults with the greatest needs,” it says.
“Expenditure on psychosocial supports is too concentrated on the relatively small proportion of people who meet NDIS eligibility criteria.
“This gap is fuelling a growing problem … People without adequate support are more likely to experience homelessness, be admitted to hospital, or have their needs escalate – adding pressure to systems already under strain.”
This has worsened as more people with psychosocial disabilities are knocked back from the NDIS – eligibility rates fell from between 78 and 86 per cent in the scheme’s first three years to just 25 per cent in 2024-25, according to the report.
The significant inequities in Australia’s mental health and disability system mean many people with moderate support needs languish in a no-man’s land between Medicare supports, minimal state-funded options and NDIS packages designed for permanent and long-term disabilities.
Fixing that issue is one priority for Health and Disability Minister Mark Butler as he tries to return the NDIS to its original purpose before it becomes a $100-billion-a-year item in the federal budget.
The federal government has already taken over the design of a new children’s disability system, called Thriving Kids, but the new psychosocial disability scheme has not progressed as premiers remain torn over the budget commitment while their hospital costs soar.
The Grattan Report recommends they agree to a new scheme called the “National Psychosocial Disability Program” that caters to 230,000 Australians.
Central to the program would be a new healthcare role of “support facilitator” – health workers who would work one-on-one with about 20 people with psychosocial disabilities at a time.
The facilitator would be empowered to distribute $3000 funding per person to meet short-term needs, such as specialist medical assessments or one-off cleaning services for hoarding. They would also guide people towards community participation programs, peer support and recovery colleges.
Existing Primary Health Networks would be tasked with co-ordinating their services, which would generally be offered for three years at a time, but fluctuate based on need.
Crucially, the program’s purpose would be to help people recover and prevent them needing more intensive disability support. One problem with the NDIS model is that it requires people with mental illnesses to deteriorate to receive support, and they lose help if they get better.
“About $2.2 billion per year could be redirected to fund an ambitious tier of recovery-oriented psychosocial supports for people outside the NDIS who are currently missing out,” the Grattan report says.
This is equivalent to about one-quarter of projected NDIS payments to people with a primary psychosocial disability. At full scale, the program would cost $2.6 billion in 2030-31.
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The Grattan report said governments had committed to building better psychosocial supports, “but progress has stalled due to overlapping responsibilities, contested roles, and fiscal constraints”.
“Governments should pivot from the current plan. Requiring new funding has led to unnecessary delay,” it said.
Butler last week said the negotiations were still productive, despite some state governments complaining otherwise.
“On Monday, there’s another full-day negotiation meeting, which is proceeding constructively,” he said.
“There’s a lot of buy-in from all governments because it’s in all our interests to get this right in the interests of our citizens.
“Whether we can get this done by the end of the year is still a bit uncertain ... but all of us are working really hard.”
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