Butler's NDIS Warning Shot: What Allied Health Providers Need to Know Before the Budget
Mark Butler's National Press Club address on the 22nd of April ran for over an hour, including questions. He covered the future of the NDIS in detail without mentioning Allied Health or capacity building once.
The phrase that kept coming up was "functional capacity." My ears perked up every time.
For clinicians listening live, you'd be forgiven for thinking this wasn't about you. But the government’s reform summary published alongside the speech tells a different story. Capacity building daily activities is explicitly named in budget resets, differentiated pricing and more.
This article is an interpretation of what was announced, what the published detail reveals that Butler didn't say out loud and what Allied Health providers should do about it. For a comprehensive summary of the speech itself, DSC have published an excellent breakdown. I'm not going to duplicate that here. This is the Allied Health lens.
Sources: Butler’s speech | Government reform summary | NDIS Review Final Report
Why this speech, why now
Butler deliberately pulled this announcement out of budget week. He said explicitly that he wanted to "allow a bit of conversation about this package, this plan, separate from the budget week." That's a communications strategy. Establish the narrative before the numbers land on 12 May.
The headline numbers are significant. The Scheme Actuary has reported a $13 billion spending blowout over the forward estimates. NDIS spending will grow at just 2% per year over those forward estimates (below inflation) before returning to 5% from 2030. Total spend is projected at $55 billion by end of decade, down from $70 billion under current settings. Participant numbers will reduce from 760,000 to around 600,000 by end of decade.
Butler framed all of this around four pillars: fighting fraud, slowing cost growth, clearer eligibility requirements and delivering quality supports.
In his words: "We can't afford for the NDIS to continue growing at its present rate. But far more importantly, we can't afford for the NDIS to fail."
The legislation to enable these changes will be called the National Disability Insurance Scheme Amendment (Securing the NDIS for Future Generations) Bill, to be introduced when parliament returns for budget sittings. The Coalition has signalled support. The Greens have said they will oppose it.
I wrote in March about the existential threats facing Allied Health providers in 2026. That article outlined three converging risks: pricing reform, the shift from FCAs to I-CAN and new framework plans, and Thriving Kids. Yesterday's speech confirmed each of those risks is still firmly on the table and added several more. If you haven't read that article, I'd recommend doing so alongside this one.
What the reform summary reveals that Butler didn't say
This is the section Allied Health providers should read most carefully. The government’s reform summary published alongside the speech contains detail Butler either glossed over or didn't mention at all.
Capacity building daily activities is in scope for budget resets
Butler spoke extensively about social and community participation. The average per-participant spend reducing from $31,000 to $26,000. He was upfront: "I want to be honest with people; this will have a material impact on participant plans." He also noted that "the reduction in their budgets will appear larger than that due to differences in utilisation," meaning actual plan budget cuts will be steeper than the spend figures suggest.
What he didn't say is that the budget resets extend beyond social and community participation. The government reform summary states that the changes will "re-set participant budgets for social, civic and community participation and capacity building daily activities."
Capacity building daily activities is the NDIS support category where Allied Health therapeutic supports sit. Butler only named the first category in the speech. The second is in the reform summary. These adjustments begin progressively from 1 October 2026. The government will also end plan rollovers, stopping unspent funds from carrying over between plans. Plans will need to reflect actual utilisation.
Differentiated pricing is scoped to capacity building
The reform summary confirms differentiated pricing will apply to "unregistered providers delivering social civic and community participation, capacity building daily activities, and assisted daily living."
No detail on pricing levels yet. But the direction is clear. A two-tier market is being built. I flagged this as Risk 1 in my existential threats article. Butler's announcement confirms it is coming. The government will also transfer pricing decisions from the NDIA to the Minister, making pricing governance political rather than agency-led.
Tighter reasonable and necessary assessments from February 2027
The reform summary confirms the government will "strengthen guidance around what is reasonable and necessary" and "more consistently assess if the NDIS is the appropriate system of support." These changes will be progressively implemented from 1 February 2027.
In practical terms, this means stricter assessment of whether the supports in a participant's plan meet the reasonable and necessary criteria under the NDIS Act. For Allied Health providers, this is the gateway for therapy in plans. If the bar for what qualifies as reasonable and necessary rises, the evidence supporting therapy in plans needs to rise with it.
The structural changes that matter for Allied Health
Several changes confirmed in the speech have direct implications for Allied Health operations, referral pipelines and business models.
New Framework Planning delayed to 1 April 2027
The rollout of new framework plans has been delayed again, from July 2026 to 1 April 2027. Butler cited "legislative uncertainty" and decisions in the Federal Court and Administrative Review Tribunal as the reasons.
The current planning system stays in place for another year. The shift to I-CAN-based support needs assessments, which I covered in my article The NDIS FCA Problem Nobody Wants to Talk About, is delayed but the trajectory remains the same: standardised assessments replacing provider-written reports as the primary planning input.
Unscheduled reassessments limited to exceptional circumstances
Currently 1 in 5 plans are subject to an unscheduled reassessment each year, "often at the request of Plan Managers who can stand to gain, not participants." The average result is a 20% increase in plan value.
Going forward, these will be limited to "exceptional circumstances" where there has been "a significant change in circumstance for the participant." The new criteria take effect 7 days after the legislation passes.
For Allied Health, this means fewer reports. But with tighter reasonable and necessary assessments arriving from February 2027, the reports you do write need to be stronger. Quality of evidence matters more as volume decreases.
Intermediary spending cut, with commissioned panels replacing the open market
Plan manager and support coordinator spending will be cut by 30%, replaced by a panel of commissioned providers. The new plan management approach starts from 1 October 2027, with the new support coordination function from 1 July 2028.
This changes referral pipelines. Plan managers and support coordinators are how many participants find therapy providers. If those intermediaries consolidate, the referral relationships driving your caseload may change. Providers without strong direct referral networks will feel this most.
Registration and pricing will reshape the provider market
Mandatory registration is expanding to cover personal care, daily living supports and closed settings, commencing from July 2027. While those categories map more directly to support workers, the broader market shift matters for Allied Health. 90% of all payments will eventually flow to registered providers, and differentiated pricing is coming specifically for unregistered providers delivering capacity building. Many Allied Health providers currently operate unregistered. That position is becoming harder to sustain commercially.
Providers will also be required to enrol in a digital payment system and submit evidence for every claim. Currently the NDIA has no visibility of evidence for 90% of claims.
Thriving Kids and foundational supports
Butler framed Thriving Kids as "the beginning of our determination to re-set the Scheme to its original intent." State services commence rollout from 1 October 2026, with full scale by 1 January 2028. I covered the implications for Allied Health here: Thriving Kids in 2026: What the Advisory Group Report Means for Allied Health.
The broader eligibility changes are an extension of the same logic. If participant numbers reduce from 760,000 to 600,000, the 160,000 people transitioning off the scheme need somewhere to go. That somewhere is foundational supports, recommended as the first recommendation of the NDIS Review (2023), with $6 billion already allocated by National Cabinet. For Allied Health, these programs will likely operate as a mix of commissioned services and expanded Medicare, similar to what we’ve seen recommended for Thriving Kids.
The functional capacity assessment question
Butler confirmed that diagnosis-based access lists are going. The government will "remove diagnosis lists as the means of entry to the NDIS" and "introduce standardised, evidence-based assessments of a person's functional capacity to determine access to the NDIS" from 1 January 2028 for new entrants.
He didn't clarify who conducts these assessments or what the tool looks like. A technical advisory group will be established to design it, but that group hasn't been formed yet.
My read is that this eligibility assessment is likely a separate tool from the I-CAN support needs assessment being developed for New Framework Planning. I-CAN determines what's in your plan once you're on the scheme. This new assessment determines whether you get on the scheme at all. Whether it ends up as an extension of the I-CAN pathway or a separate centralised tool is genuinely unclear. The detail is still to come. But this is one to watch closely.
Implementation roadmap
Federal Budget. Detailed line items and fiscal impact.
2026-27 Annual Pricing Review recommendations. Could land at any time.
New PAPL takes effect. Mandatory registration for SIL and platform providers.
Capacity building and social and community participation budget adjustments begin. Thriving Kids state services commence.
Tighter reasonable and necessary assessments for new entrants, renewals and reassessments.
New Framework Planning rollout begins.
Provider registration expansion commences.
New plan management approach begins (6-month transition).
Eligibility changes for new entrants (functional capacity assessments). Thriving Kids at full scale.
New support coordination function begins.
Provider registration and claims/payments system fully implemented.
What Allied Health providers should do now
1. Audit your revenue exposure. What percentage of your total revenue comes from NDIS? Within that, how much is from paediatric participants who may fall within the Thriving Kids cohort? How much comes from report writing that will reduce as unscheduled reassessments are limited and New Framework Planning shifts the role of provider-written reports? Run the downside scenarios.
2. Understand your registration position. With eventually 90% of payments flowing to registered providers and differentiated pricing for unregistered providers delivering capacity building, the economics of operating unregistered are changing. Explore what registration means for your business.
3. Prepare for the report writing shift. Fewer reassessments means fewer reports. But tighter reasonable and necessary criteria mean the reports you do write need to be stronger.
4. Watch the functional capacity assessment design and foundational supports rollout. The technical advisory group for the eligibility assessment hasn't been established yet. Foundational supports are being designed with state and territory governments. Both will reshape where Allied Health providers deliver services and how they're paid.
5. Look beyond NDIS. If government is tightening NDIS while investing in aged care and building foundational supports, your revenue strategy should reflect that. Medicare is expanding, with new Allied Health items confirmed for the Thriving Kids cohort and potentially for broader foundational supports. Private caseloads remain an underutilised revenue stream for most providers. Butler announced $3 billion in aged care investment → Allied Health keeps people out of residential aged care. I covered what providers need to know about Support at Home here.
Diversification away from NDIS dependency is a strategic priority.
What comes next
The budget on 12 May will reveal the actual line items. This speech set the narrative frame.
In March, I described a compound scenario where pricing reform, the FCA-to-I-CAN transition and Thriving Kids converge in the same 12-month window. Yesterday's speech confirmed that scenario and added capacity building budget resets, tighter reasonable and necessary assessments, intermediary consolidation, registration expansion and foundational supports to the picture.
The window to prepare is narrowing.
