Read the full discussion on LinkedIn.
The NDIA recently released the 'NDIS Pricing Strategy'. In this article our CEO, Sean, reflects on the strategy and looks toward the future. If the Strategy tells us nothing else, it’s that an unregulated NDIS isn’t a pipedream. It’s coming, and our sector must start to prepare now for business after the removal of pricing controls.
Read the full discussion on LinkedIn.
While reading the recently released NDIS Pricing Strategy, I couldn’t help but think of the old George Bernard Shaw quote that if all economists were laid end to end, they’d never reach a conclusion. Trying to predict the behaviour of any industry – let alone one as unpredictable as the disability sector – is never an exact science. But whether you agree with its conclusions or not, the Pricing Strategy should serve as a clear sign that the NDIS is slowly but surely heading towards price deregulation; a move that will seriously change the disability landscape.
THE MAGNETIC CEILING
There were many facets of the Pricing Strategy that should raise interest and encourage more discussion. Firstly – and most notably – was the fact that it could have been taken straight out of an economics textbook, complete with graphs mapping supply, demand and equilibrium. This is the NDIA at its most analytical; a pure economic model being applied to predict how the Scheme is likely to develop over time.
Looking at the Government’s own modelling in the Pricing Strategy, it’s clear that at some point in the future the NDIS will be deregulated. While it will take time for the market to mature and settle into a more efficient operational rhythm, it will happen – and when it does, the removal of price controls will change the landscape dramatically…for better or for worse.
Having worked in the motor insurance industry, which was itself deregulated in the late 1960’s, I’ve seen what can happen when market forces are free to do their work. At a minimum, consumer behaviour changes, provider margins are put under pressure and competition increases. Interestingly, price ceilings have been shown to be counterproductive when it comes to keeping prices down and delivering greater value to consumers in other sectors. With little or no incentive to compete on price, the ceiling seemingly attracts prices to the ceiling and results in bunching around the upper limit with often little or no benefit to the consumer.
Removing the price caps, if and when the market is developed, will not only add some much needed competition to the sector and in turn bring down pricing, it will likely also encourage innovation as providers look for new ways to differentiate from their competition. This should serve as a clear word of warning to organisations that expect the removal of price caps to result in an increase in pricing in the longer term - even with the development of improved products and services.
Of course, the problem with any economic model is that it needs to account for human behaviour; and as anyone operating inside the disability sector will know, predicting exactly how people or businesses will behave can be problematic. Predicting the behaviour of the NDIA at the present time is difficult enough!
PREPARING FOR LIFE AFTER DEREGULATION
While we might not be able to accurately predict how the road to deregulation will play out, there are some things that even Shaw’s proverbial view of economists might see eye to eye on.
Firstly, when deregulation eventually happens and the price ceiling is removed, there will be attrition. Regardless of where they are today, businesses who aren’t prepared and who don’t take appropriate measures to operate more efficiently will be left behind. Secondly, many businesses will be forced to choose between growing their customers or margins; they may not be sufficiently prepared to achieve both. And finally, more must be done to educate consumers, so they can become active in the market and make informed decisions.
This might all sound like it’s a long way off – after all, the NDIS is still very much in its infancy, so why think about this now? Well if the new Pricing Guide tells us nothing else, it’s that a deregulated NDIS isn’t a pipedream. It’s coming, and our sector must start to prepare now for business after the removal of pricing controls.
I’d love to hear your thoughts; do you think that deregulation will be for the best, or do you worry that it will hurt the sector? Let me know below.