Australia's Disability Scheme splashes $180 million on consultants in 16 months

14 December 2017

Australia’s landmark scheme to assist the living of millions of disabled citizens has been plagued by set-backs since its roll-out in 2016. Now the National Disability Insurance Scheme has come under fire for it’s ever-growing consulting spend, as it attempts to recover from staffing and IT issues.

Australia’s consulting market grew by more than 5% to a value of $4.6 billion last year. In line with global trends, the growth is thought to have been driven by a strong economy, renewed client focus on expansion, and a healthy appetite for digital innovation. However, a large factor in the industry’s success in the land Down Under is the substantial uptake for its services by the public sector, with current Prime Minister Malcolm Turnbull’s reform agenda seeing governmental spending on external expertise rise 8.2% to AU$845 million since his assuming office.

This agenda has seen digital adoption become an important driver across both government and the education sector – however the spending of the Australian government spending on consulting in order to implement this has not been without its detractors. Australia’s national government have been under increasing media scrutiny following the announcement executive spending on consultancies had hit a staggering AU$5 billion over the past decade. The Liberal/National coalition also faced accusations of conflicting interests, as a number of prominent ex-civil servants and even a former Prime Minister were among consultants hired via the tax-payers’ purse.

Now, leaked financial records pertaining to the National Disability ­Insurance Scheme (NDIS), first reported by The Australian, have revealed that executives in charge of running the governmental agency behind the scheme spent more than AU$180 million on consultants and contractors between July 2016 and October 2017. Of that figure, as much as AU$41.5 million was spent on just two major consulting industry players for “strategic advice”.

The NDIS was initiated by the Australian Government to assist Australians with a disability, and following its establishment by the National Disability Insurance Scheme Act 2013, the NDIS commenced being rolled out nationally on 1 July 2016. The AU$22 billion reform has been hit by growing numerous set-backs, following a lengthy process to enshrine it in bilateral agreements signed between the federal government and states under the Labour administration of Julia Gillard, and it has since been heavily criticised by the Productivity Commission.

Consulting spend of the Australian National Disability Scheme

In order to improve the performance of the NDIS and work through major problems with the fledgling scheme – including issues pertaining to a near total IT meltdown in the middle of last year, which saw a number of client plans left in disarray – the National Disability ­Insurance Agency (NDIA) engaged outsourced expertise over the past 16 months. The total fee for those services came to almost triple its $66 million consulting bill between 2015-16, in an act that took the Agency’s total taking the total reckoning to almost a quarter of a billion Australian dollars. In contrast, the whole of Australia’s Department of Social Services spent $15.5 million on consultants in 2016-17.

The leading beneficiary of the NDIA’s spike in funding was global behemoth The Boston Consulting Group, which brought in $21 million as its help was sought to overhaul a planning system which had been criticised by those with disabilities as deceitful and underhanded, as they were often shunted onto support packages with little or no understanding of what had transpired. Adding to the public ire now surrounding the glut in consulting spending, however, a conflicting fund of $10 million was provided to consultants at Australian Healthcare Associates, in order to conduct telephone planning and “information gathering” for the first support plans of NDIS clients, which were the very ones being jettisoned under the new “participant pathway” BCG subsequently helped design. The BCG contract for planning reform officially came to an end on October 30th, however a “small team” is remaining to assist the embattled Agency.

Big Four professional services firm Deloitte were close behind BCG in the total fee they levied on the NDIA, as the recipients of a total invoice of $20.5 million to date. The consulting giants hold an ongoing contract with the NDIA, as its ICT Services Strategic Partner, as the NDIS struggles to recover from numerous digital issues.

According to an NDIA spokeswoman, the difficulties experienced by the Agency are par the course, stating, “The National Disability Insurance Scheme is a complex and highly valued national reform and the scale, pace and nature of the changes it is driving are unprecedented in Australia.”

Short staffed

At time of writing the NDIS has 120,000 people with disabilities on its books, with a target of 460,000 set for the middle of 2020. However, those targets remain a distant figure, as the Agency remains severely under-staffed. The NDIA has struggled to recruit experienced, full-time staff despite having spent heavily on recruitment services. The largest recipient in this respect was with Hays Specialist Recruitment, at $15 million, while $7.5 million was paid to DFP Recruitment Services. The NDIA also spent $17 million with Cushman & Wakefield, a commercial property specialist.

As discussed at a Senate estimates hearing in October, the NDIA employ 2127 staff, 1012 contractors and 2203 local area co-ordinators. This means, according to executives at the hearing, that the Agency remains “about 500-ish” full-time equivalent ­positions below a public service cap of 2460 places – however a number of these hires are non-permanent.

In this respect, the NDIA are in line with the Civil Service hiring policies of the UK, which is similarly stretched by the new workload of Brexit – following departmental layoffs thanks to seven years of austerity cuts. Whitehall have also relied heavily on outsourcing to professional services contractors, as a short-term answer to what may well be a long-term issue.

In terms of Australia’s NDIS, regardless of where those staff have come from, to date, many service users feel under-supported. One notable source reported in newspaper The Australian said that she was extremely frustrated, having requested an iPad and speech app in March for her five-year-old daughter Felicity, who has severe speech and language delays.

“Five months after making the request, our speech pathologist was sent a letter stating the NDIS had changed its forms and we had to reapply,” Adelaide-based mother of two, Chantelle Care-Wickham said.

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Medicine economic model creates negative health outcomes

26 March 2019

Profit-driven production of antibiotics has held back the development of vital medical breakthroughs, according to a new report. Analysis from a leading strategy consultancy suggests that a change in economic model and new incentives could prompt pharmaceutical giants to develop cures to major diseases, which could be affordable at scale.

The much maligned pharmaceutical industry has long been criticised for its failure to focus on deep seated issues in public health. For instance, there is increasing concern around microbial resistance, with some bacteria now resistant to all known antibiotics. Combating that requires new antibiotics – but drug companies see little profit in the field, and therefore have not seriously invested in it. Another instance of concern is a focus on treating symptoms rather than curing the diseases themselves, with such treatments requiring long-term payment to mitigate symptoms, rather than one-time cures being delivered.

Cases like the so-called “Pharma Bro” Martin Shkreli – who received widespread criticism when his company obtained the manufacturing license for the antiparasitic drug Daraprim and raised its price by a factor of 56 (from US$13.5 to $750 per pill – underline the failing of this system to meet the needs of society. New analysis from Boston Consulting Group (BCG) seeks to challenge the current economic model and its inherent failures in favour of a model that creates greater social good while also generating steady reliable returns for pharma companies. The analysis appears in the firm’s ‘Aligning Economic Incentives to Eradicate Diseases’ report.

Different pricing model makes cures more accessible

One example is Hepatitis C. The disease is massively damaging to human life, with considerable negative impacts on patients and society. Treatments have existed for decades, which manage the virus but did not cure it. These treatments had significant side effects however, which saw people not complete rounds – which then resulted in expensive emergency care and secondary health costs.

In 2013 a treatment was developed that effectively cured the virus in 8-12 weeks. The treatment has few side effects and works in most patients. However, five years later fewer than 10% of people globally with the virus have had the cure – largely because of prohibitive costs. The ambition to remove this disease and its large negative drag on the lives of millions by 2030 is becoming increasingly unlikely. The issue is cost.

The current economic model used by pharmaceutical companies mean that early adopters pay sky high prices as the company seeks to recoup costs, with the price eventually coming down to levels at which a larger segment can afford to access the drug – before its generic releases sees mass uptake. This model creates considerable initial barriers, and long-term social costs.

The report subsequently proposes a different pricing model that would see the price of a new drug kept at a constant level for its lifetime but have that level set considerably lower than the current model - which is focused on recouping costs immediately. Under the firm’s model, within 12 years of the Hepatitis C drug’s discovery, up to 96% of the population could be cured, at a cost 30% lower than the UN model and with a cure rate almost 50 percentage points higher than the base model.

The PLA scenario has better social outcomes than the traditional model

A change in model would, according to the firm’s analysis for HCP, triple the number of patients cured within 2 years, reduce the number of liver disease deaths by 60%, reduce total costs to payers by 30% (due to fewer additional costs on healthcare systems), while creating higher and more predictable revenue streams for pharma companies.

“There are many barriers to curing this population, but the dilemma created by current pricing models is one of the biggest,” said Dave Matthews, a BCG Principal and study co-author. The firm adds, “The dilemma results because a high price per patient makes treating everyone prohibitively expensive while an affordable price is too low for pharmaceutical companies to earn back their investments.”

Matthews concluded, “Switching to a population-based model such as the PLA not only makes the cure affordable, but also creates strong motivation to identify, diagnose, and treat as many patients as possible before the license expires.”

Related: Ten year deal activity in pharmaceuticals industry stands at $2.4 trillion.