Opinion
Compensation, risk and the NDIS
29th Apr 2021
Why should I bother suing given the NDIS?
It took a while for injured Australians to get their heads around the National Disability Insurance Scheme (NDIS), but in recent years, more and more have. The odds are that many of your clients and prospective clients are already NDIS participants and they will want to know what they will ‘lose’ if they get compensation. And they will want your assurance that the risk, stress and cost of litigation will be worth it.
Weighing up the risks
You will need to explain the pros and cons of seeking compensation, and weigh up and help clients to understand the various risks and rewards.
We all know the very valid reasons behind people wanting lump sum compensation. While this can perhaps sometimes be reduced to a desire to buy a home, the reasons run deeper than Australians’ property obsession.
The reasons go towards the fundamental need for people to have more safety, be less vulnerable, and not be at the mercy of other people’s decisions. People want the freedom to live without scrutiny and get on with their lives with some agency.
Factoring in the NDIS
Since its introduction, the NDIS has been steadily shifting the advantages and disadvantages of pursuing compensation. The following are a few tips that might help you in your discussions with current and prospective clients.
Repayment at settlement
People rightly fear large debts (at least outside the context of buying a home). They fear incurring a large debt to their lawyer, and they fear any large debt to the government.
You can explain the former in terms of your ‘no-win-no-pay’ type fee arrangement. You can also explain that Centrelink has to be repaid from any settlement.
Some clients’ fear of a Centrelink debt keeps them from claiming anything pre-settlement. You can reassure your clients by showing them calculations of an adequate net settlement amount after repayments to Medicare and Centrelink.
The same factors are at play in relation to the NDIS. Again, some clients do not want to participate in pre-settlement for fear of debt but often have no other choice.
Over the years, NDIS repayments at settlement have grown steadily larger. As these repayments continue to grow, this will impact your calculations. Old assumptions about what a case is ‘worth’ will need to be revisited in a context in which the NDIS exists.
You can explain the following to your client:
- The NDIS exists to provide support to those who qualify.
- Seek NDIS support pre-settlement, if wanted or needed.
- Assume that NDIS payments will all need to be repaid but more than enough will be recovered for the repayment in the settlement.
- The repayment can be reduced if some of the support has been for pre-existing impairments.
- The repayment can also be reduced if your damages are reduced for contributory negligence.
- This can all be discussed and the NDIS will be engaged before and after settlement.
Compensation Reduction Amount (CRA)
The NDIS CRA works differently to the Centrelink preclusion period.
When a compensation payment includes damages for economic loss, the plaintiff is cut off from Centrelink income completely until a fixed date, after which the normal means tests apply. The relevant calculation essentially assumes that half of the settlement was for lost income and this is assumed to be gradually spent over time until the fixed date.
When a compensation payment includes damages for future NDIS-type supports, the plaintiff can remain on the NDIS but with a fixed annual reduction amount until the full CRA has been ‘repaid’ (by way of reduced funding). The relevant calculation estimates the amount of the settlement that was for future NDIS-type supports and this is assumed to be spent on these supports over time.
The CRA has not been a significant problem for lawyers in recent years as it was not being calculated (though we knew that at some future point there would be some sort of reduction in NDIS funding). But now that these calculations are being done, clients will want to know as much as possible before they commit to proceeding with their claim.
You can explain the following to your client:
- The CRA will be calculated post-settlement.
- The CRA is an estimate of how much of the settlement was for future NDIS-type supports.
- The NDIA only wishes to reduce future NDIS funding to this extent.
- The actual settlement will be calculated based on full compensation, not just NDIS-allowed minimums for future care, equipment, therapy, etc.
- The CRA calculations at this stage seem fair (to the injured person and the taxpayer).
- As their lawyer, you will try to obtain an estimate from the NDIS in the lead up to settlement.
- The calculation is complex and requires inputting a figure calculated by the office of the NDIA actuary. Usually, the total CRA is no more than half of the settlement sum, then it is divided by remaining life expectancy.
- Most clients continue to receive some NDIS funding post-settlement and post-CRA.
- If needs increase significantly beyond what the compensation payment anticipated, the NDIS plan will increase.
NDIS cuts are inevitable
In recent years, some have formed an overly rosy view of the NDIS.
Many participants have learned how to navigate the scheme. They have learned the jargon, the online systems and various processes. For them, the appeal of just carrying on (with no repayments or future reductions) is strong.
But as NDIS costs have been rising, the federal Government has been and will be taking action to cut costs. Calculating and imposing CRAs is just the start.
As we have heard in recent weeks, ‘independent’ assessments are being introduced with a clear cost-cutting objective. Changes are being devised to grant the federal minister extensive powers, possibly including the ability to raise debts against participants for funding received.
The threat of debt recovery in the context of a relatively new and extremely complex scheme is and should be of great concern to all. It is still very unclear what will and won’t be funded by the NDIS. Plus, Robodebt is fresh in people’s minds (if not the Government’s).
You can explain the following to your client:
- NDIS funding is and will remain uncertain.
- The need to continue to jump through bureaucratic hurdles will persist, and likely increase.
- Government policies will change and this will be out of your control.
- By contrast, a net settlement sum (once received) will give you some valuable certainty.
Summary
Going forward, be ready to explain to your clients that you have done your sums and factored in the statutory repayments, and have concluded that the net lump sum is worth pursuing.
Your client will need to be aware of the Centrelink preclusion period and the reduction in NDIS funding, especially if they do use some of that settlement money for another purpose, such as to buy a house.
Perhaps in some cases, the balance of risks has changed. But for most I would expect that overall, clients will be financially better off by securing compensation. In terms of quality of life post-settlement, they will also have more freedom, flexibility and control. They will be less at the mercy of government policy.
Simply put, the NDIS will complement but does not replace the need for compensation.
Jane Campbell is a longstanding ALA member and former lawyer. She is the principal of Aeran, an independent financial advice practice specialising in financial advice for people receiving compensation for personal injury. She has kept a close eye on the NDIS from its earliest conception. She helps clients and their lawyers with the interaction between compensation and the NDIS.
The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).
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