October communique relates to the meetings on 9 and 23 October 2018.

In response to the Independent Pricing Review, the National Disability Insurance Agency (NDIA/Agency) has established a Pricing Reference Group (PRG) to guide National Disability Insurance Scheme (NDIS/Scheme) price regulation activities and decisions to support Scheme objectives during the transition to a competitive marketplace.

The PRG is tasked with:

• reviewing market prices and factors influencing markets, including market monitoring activities and timely responses to market issues that arise;
• deciding when and how to consult sector stakeholders on price regulation matters, which might include publishing consultation documents and/or hosting workshops and events;
• making price regulation decisions based on a consistent impact assessment framework that considers:
  • expected costs and benefits for participants, providers and other relevant stakeholders, including the distribution of these costs and benefits;
  • risks, along with any options to manage/mitigate these risks; and
  • any other impacts that are relevant to the successful delivery of the Scheme; and
• publishing decisions and the reasoning for these decisions where appropriate.

As well as members of the Executive Leadership Team of the Agency, the PRG has two independent members.

• Mr Graeme Innes AM was Australia's Disability Discrimination Commissioner from 2005 to 2014. As a human rights advocate for the past 30 years he has played a role in many human rights and disability initiatives, including the drafting of the United Nations Convention on the Rights of Persons with Disabilities. Graeme is currently a member of the NSW State Insurance Regulatory Authority and a member of the Boards of the Life Without Barriers, the Summer Foundation, and Joblife Employment. He brings a wealth of disability policy and practice experience as well as the perspective of the lived experience of disability.
• Mr Jim Cox PSM is a Board Member of the Australian Energy Regulator and an Associate Member of the Australian Competition and Consumer Commission. He brings a wealth of experience for regulatory best practice.

The PRG held its first meeting on 9 October 2018 and also met on 23 October 2018.

The next meeting of the PRG is scheduled for 14 December 2018.

Further information can be found on the PRG page on the NDIS website.

Western Australia Market Review

On 12 December 2017, the Prime Minister and the Premier of Western Australia announced a new Bilateral Agreement for Transition to the National Disability Insurance Scheme (NDIS) in Western Australia.  As part of this transition, the National Disability Insurance Agency (NDIA) has committed to review existing price controls and other market settings to determine whether they are appropriate for Western Australia.

The PRG has determined that the Review will examine:

• the state of the markets for the delivery of disability goods and services in Western Australia, including any substantial differences from the markets for the delivery of disability goods and services in other jurisdictions;
• whether the existing NDIS support catalogue, and the price controls and associated rules set out in the NDIS Price Guide are appropriate for Western Australia (e.g. allowances for provider travel); and
• whether the existing NDIS arrangements can accommodate existing Western Australian service delivery models (including innovative support options).

The Review will commence in December 2018 and deliver recommendations to the PRG in April 2019, for implementation from 1 July 2019.

It will be conducted in consultation with industry, community and government stakeholders, including through:

• the early release of the Terms of Reference and timeframe of the Review;
• an opportunity to make preliminary submissions to the Review in response to the Terms of Reference;
• targeted consultations with industry, community and government stakeholders and four public workshops with providers; and
• the development and release of an Issues Paper with draft recommendations with a further opportunity for comment, including through submissions and targeted consultations.

Further information can be found on the WA Market Review page on the NDIS website.

Specialist Disability Accommodation

Specialist Disability Accommodation (SDA) is one of the supports that may be funded under the NDIS for some participants. SDA funding is provided to participants who require a specialist dwelling that reduces their need for person-to-person supports, or improves the efficiency of the delivery of person-to-person supports. SDA funding is only provided for participants who meet the eligibility criteria. Participants who meet the eligibility criteria will have an extreme functional impairment and/or very high support needs.

The PRG has decided to index the price limits for SDA in line with movements in the Consumer Price Index (CPI) (in the year to 31 March 2018) – that is, by 1.9 per cent. The new controls will apply from 1 January 2018.

The new price limits are set out in the National Disability Insurance Scheme Price Guide for Specialist Disability Accommodation (2018) available on the SDA Pricing and Payments page on the NDIS website.

Pricing for complexity

McKinsey's Independent Price Review (IPR) identified participants with highly complex needs as being one of the cohorts at high risk of supply shortages. This is due to the increased average cost of service provision and limited availability of a skilled workforce for these participants.

To proactively manage this risk and to improve the economics of efficient providers operating in the highly complex needs market, the IPR made two complexity-related recommendations:

• IPR Recommendation #6: The NDIA should develop a definition for complexity linked to the skills required to meet participant's needs, and use its specialised planning resources to classify what skills are required, and which participants require higher skilled support workers; and
• IPR Recommendation #7: The NDIA should add an additional tier to the high intensity loading to allow a provider to recover the cost of a support worker with a higher level of skill than can be procured with the current high intensity loading. An incident reporting line item should also be introduced to allow providers to charge for time spent on this activity.

The PRG considered in depth the results of the complexity pilot that was conducted with providers across Australia in July-September 2018. The pilot (i) trialled a cost level classification tool with eight providers; (ii) conducted in-depth financial diagnostics with five providers; and (iii) consulted with an additional nine providers and peak bodies to test the proposed approach.

On the basis of these considerations, the PRG made recommendations to the NDIA Board on options to implement IPR Recommendations #6 and #7 and to respond to the risk of supply shortages for services for participants whose needs mean that their attendant care and community participation supports must be delivered by a higher average staffing skill mix

On 22 November 2018 the NDIA Board considered the PRG's recommendations and determined to respond to IPR Recommendations #6 and #7 by:

• replacing the current two levels of price controls for attendant care and community participation support items with three levels of price controls, with:
  • the level of the price control applicable to each support determined by the skill level of the worker delivering the support;
  • the same price controls for the Level 1 (Standard) supports as currently;
  • a loading of 5.6 per cent on the Level 1 price control for the Level 2 Price control (in the benchmark case), as currently); and
  • a loading of 10.3 per cent on the Level 1 price control for the Level 2 Price control (in the benchmark case); and
• applying a Temporary Support for Overheads (TSO) of 2.5 per cent to those items, in line with the increase that was applied to standard attendant care support items from 1 July 2018, including reducing the level of the TSO to 1.25 per cent on 1 July 2019 and to zero on 1 July 2020.

The new arrangements will be implemented from 1 February 2019.

Therapy pricing

Therapy services are crucial supports for many NDIS participants. The PRG has decided to undertake a review of the price control arrangements and other market settings for therapy services in the NDIS. The Review will:

• examine the nature of the market for therapy services, including the extent to which the market is made up of distinct segments, including in thin and undersupplied markets and in regional and remote areas;
• undertake detailed benchmarking on both therapy supports and therapy assistants versus both relevant comparable schemes and private mainstream markets; and
• examine the extent of competition in the market for therapy services, and whether segments of the therapy services market are ready to trial price deregulation.

The Review will make recommendations on:

• the appropriate price control arrangements for therapy services in the NDIS;
• options to encourage the development of innovative support offerings by providers of therapy services in the NDIS; and
• market interventions, other than price limits, that may have positive impacts on the market for therapy services in the NDIS.

The Review will commence in December 2018 and deliver recommendations to the NDIA's Board in the Third Quarter of 2018-19, for implementation in the Fourth Quarter of 2018-19.

Further information can be found on the Pricing review of therapy services page on the NDIS website.

Next meeting

The PRG will consider the Terms of Reference for the Annual Review of Costs, Efficiency and Price Controls at its meeting on 14 December 2018.