Four key changes could save the NDIS, new Grattan report says, but advocates worried children left out

The Guardian

30-06-2025

The National Disability Insurance Scheme has grown too big too fast, but four key changes could 'save' it while ensuring disabled Australians get the help they need, according to a new report from the Grattan Institute.
It comes as federal and state governments continue to negotiate a funding deal for new 'foundational supports' – disability-specific supports outside of individual NDIS packages that were supposed to be operational by today.
But advocates have warned against some of the institute's suggestions, expressing concern changes would leave children out of the scheme.
The report, Saving the NDIS: How to rebalance disability services to get better results, says costs must be reined in – but this can be done in a way that ensures Australians living with disability can get help.
The NDIS remains one of the biggest pressures on the federal budget, costing nearly $42bn in 2023-24, which is expected to grow to more than $58bn by 2028.
In 2011, the Productivity Commission estimated a mature NDIS would serve 490,000 people. But as of March the scheme was supporting more than 700,000 people and that number was projected to pass one million by 2034, according to the NDIS.
The number of adults in the scheme was only slightly higher than originally expected, but the number of children is nearly double, according to the institute's report. Despite this, many Australians living with disability don't qualify for the NDIS, and there is little support for them outside the scheme.
'The problem is the NDIS has become the only game in town,' the Grattan Institute's disability program director Sam Bennett said.
'You either get an NDIS package, or you get minimal mainstream services. That means disabled Australians have an incentive to try to get into the NDIS – and once people get in, they tend not to leave.'
To address the issue, the report has called for four key changes to ensure it survival into the future.
First, the NDIS needs firmer boundaries so it is clear who the scheme is for and what needs it is intended to meet, the report says. This would include strengthening eligibility criteria for permanent impairment and removing the early intervention requirements so children get foundational supports.
Second, the way the NDIS manages claims needs to change so funding is allocated fairly and consistently. People should have more choice and flexibility in how they use their NDIS funding so they can access support from a wider range of places, and expedite NDIS rule changes to support the adoption of a new needs assessment and budget setting process.
Third, the federal, state, and territory governments should establish a strong tier of 'foundational supports' to ensure people get appropriate supports when and where they need them, the report says.
Under Grattan Institute's plan, the existing NDIS budget would be used to fund foundational supports from within the same funding envelope.
And fourth, Australia needs a new National Disability Agreement, to clarify the relationship between all aspects of the disability policy landscape and to facilitate cooperation and greater accountability between governments.
The current NDA was crafted in 2008, before the NDIS even existed.
The Grattan Institute blueprint to rebalance disability services would reduce NDIS payments by about $12bn over the next 10 years, and create further savings of $34bn over the same period by not requiring new money to fund foundational supports.
'Saving the NDIS is not a question of spending more money – our analysis shows the problem lies in how existing funding is allocated,' Bennett said.
Children and Young People with Disability Australia CEO Skye Kakoschke-Moore said she was alarmed by the recommendation that the early intervention pathway for children with developmental concern or delay be removed from the NDIS and instead replaced with targeted foundational supports.
One of the biggest drivers of cost to the NDIS is children. As of March 2025, there were 167,876 children under 9 on the NDIS, according to the latest quarterly report.
While the government said it would set up alternative supports, there has been no communication on what that would look like, leaving families in the dark, Kakoschke-Moore said.
'We also know that there the NDIA are currently undergoing a large amount of eligibility reassessments, particularly with children who are on the scheme, and that of those that are being reassessed, a large proportion, close to 50% or more, either being removed from the scheme or having their plans cut.'
Bennett said under the Grattan plan no one would 'lose their services'; it was just about 'making the money work better and smarter in some ways'.
'We do know that we're having a lot of children reassessed right now and waiting to exit the NDIS, as is happening every week; they are leaving to no foundational supports,' he said.
'Under the Grattan plan, if kids need ongoing support, the funding will follow them essentially.'
The health minister, Mark Butler, said negotiations on foundational supports with the states were ongoing, with the initial focus on children under the age of nine with mild to moderate developmental delay or autism. The second focus group would be people with psychosocial disability, he said.
'We know those Australians without support are bumping in and out of emergency departments, in contact with justice and police systems, are vastly overrepresented in our homeless population and, frankly, deserve better,' he said.