Price caps are a core regulatory tool of the National Disability Insurance Scheme (NDIS). The National Disability Insurance Agency (NDIA) sets maximum prices to protect participants from excessive charges while maintaining provider viability, encouraging efficient delivery, containing short-term costs, and influencing budgets and market outcomes.

This paper examines how market prices and service volumes (measured in hours) responded to the 1 July 2025 NDIS price caps adjustments using detailed service usage data. These adjustments varied across services, with some caps increasing, some decreasing, and others remaining unchanged. This variation allows us to study how markets respond to both upward and downward changes in regulated prices. 

The analysis focuses on short-run responses in the weeks following the price cap changes. Taken together, the results show that market prices adjusted rapidly following cap changes in both directions, while short-run service volumes remain broadly stable, with small contractions concentrated in services facing larger cap reductions. 

With scheme expenditure and participant numbers continuing to grow, these results suggest that price cap adjustments affect both expenditure and service provision, highlighting a trade-off that warrants ongoing monitoring of provider behaviour over time.

Key results

• For services with price cap increases:
  • market prices rose immediately
  • aggregate service volumes remained unchanged in the short run
  • providers pricing well below the cap before the change raised their prices when caps increased.
• For services with price cap decreases:
  • market prices fell immediately
  • overall service volumes remained broadly stable
  • while all providers reduced prices after a cap reduction, those previously pricing at the cap adjusted substantially more.
• For services with unchanged caps:
  • no change in market prices or service volumes was observed.