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While the National Disability Insurance Scheme (NDIS) promises to improve the lives of more than 400,000 Australians with a disability and their families, the scheme has been marred by a range of implementation challenges. In particular, there has been much concern over thin markets and market gaps. Under the choice-of-provider model adopted by the NDIS implementers, meaningful choice and control for participants depends on local ‘market structure’.  That is, the availability of multiple, competing providers. Market deficiencies, such as ‘thin’ markets and market gaps, therefore threaten the public policy goal of increasing choice and control for people with disability. More broadly, they present challenges for equity; individuals in particular geographic areas or with less common needs may receive poor quality services or no service at all.

In response to growing concerns over the development of markets within the NDIS, key bodies such as the Productivity Commission and the Joint Standing Committee on the National Disability Insurance Scheme Public Inquiry have called for ‘market stewardship’.

Market stewardship broadly refers to efforts to address market deficiencies, such as thin markets, market gaps or other market failures, and is also known as market shaping. While the need for market stewardship is widely recognised, in the scheme design it is clearly envisioned that the National Disability Insurance Agency (NDIA) will only intervene when it can be demonstrated that market failure has occurred. This poses difficult questions about how the NDIA can detect market deficiencies and what strategies it can use to address them. It also means the NDIA must attempt market stewardship before commissioning services to address market gaps.

In this report we draw together the international literature on effective quasi-market interventions for managing market failures and gaps.

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