NDIS to shrink by 160,000 Participants under eligibility overhaul

Health Minister Mark Butler has announced the biggest structural change to the NDIS since its creation, scrapping diagnosis-based access in favour of functional assessments, with modelling suggesting around 160,000 fewer participants over the next four years.

In a speech to the National Press Club on Wednesday, Butler said the scheme would see participant numbers reduce over time from its current 760,000 to around 600,000 by 2030, compared with earlier projections of well over 900,000.

Some people with lower support needs are expected to transition to state and territory “foundational supports” that are still being designed.

The changes represent a major shift for a scheme originally tracking towards far higher growth. Butler warned that without reform, the NDIS “simply will not be there in the future for the Australians who need it most.”

How access will change

The government will abandon the diagnosis-based “access lists” that have determined NDIS eligibility since the scheme began, replacing them with standardised assessments of how much a disability affects everyday life.

Butler said the lists “were put in place to get the Scheme up and running” and “were always supposed to make way for an objective assessment tool.”

Under the new system, two people with the same diagnosis may receive different outcomes depending on functional capacity. The government has said the approach will not target any specific diagnosis, including autism, but will apply across the board based on level of need.

The changes will not be immediate. New participants will face functional assessments from 2028, while existing participants will be reassessed over time, usually at plan reviews.

Legislation will be introduced when Parliament returns for the budget session in May, with details to be worked through over coming months with a technical advisory group, disability community representatives and state governments.

Where rejected participants will go

The government has committed to working with states to establish what it calls “Foundational Supports” for people who do not meet the new NDIS criteria.

Butler said this would “rebuild systems that used to be there for people with less significant support needs in partnership with the community and States and Territories.” He acknowledged these systems were “unfortunately dismantled, leaving the NDIS as the only port in a storm for many Australians.”

National Cabinet has already allocated $6 billion to this work, which will operate alongside programs such as Thriving Kids.

However, these alternative supports are still being designed. There may be a period where eligibility tightens before new systems are fully in place.

A separate $200 million Inclusive Communities Fund will rebuild community-based supports outside the NDIS, open to both mainstream and disability organisations.

Budget pressure and social participation changes

While eligibility changes will not begin until 2028, funding changes are expected to begin much earlier through the upcoming budget.

The government is targeting social and community participation spending, which has risen from $4 billion annually five years ago to more than $12 billion currently. Without intervention, Butler said it would reach around $20 billion by the end of the decade, roughly equivalent to the entire Pharmaceutical Benefits Scheme.

The government will cap and reset spending in this category to recent levels, preventing further growth. These changes are expected to begin through budget and legislative measures rather than being delayed.

Families can expect less growth in funding for community access and participation supports, with changes more likely to appear at plan reassessments rather than as immediate reductions.

Social and community participation

Butler criticised how social and community participation funding has evolved, arguing it has not delivered the inclusion the NDIS was designed to support.

The scheme was intended to open up community life and enable genuine participation. Instead, he said, many community programs that once provided real connection have been “allowed to wither away.”

Where volunteer-run programs still exist, they are often overwhelmed by NDIS providers dropping off participants without notice. Some participants have also reported support workers spending more time on phones than engaging in support.

Butler cited reports of participants falling from wheelchairs while support workers were distracted. “There’s no connection there, no participation, no inclusion,” he said. “This is not only a failure to show respect and dignity to the individual, but also a safety issue.”

The government says this category of support has become highly expensive, growing from $4 billion to more than $12 billion and tracking towards $20 billion by decade’s end.

It argues the current model has failed to deliver genuine inclusion and has weakened the community organisations it was meant to complement.

The $200 million Inclusive Communities Fund is intended to rebuild that capacity, although funding will tighten before alternatives are fully operational.

A system struggling with oversight

Much of Butler’s speech focused on what he described as fundamental design flaws in the NDIS.

The scale of the oversight challenge is significant. The NDIA has limited visibility of supporting evidence for around 90 per cent of claims processed — approximately 600,000 every day. Most plans are managed by third parties, limiting direct oversight of spending.

The government’s Fraud Fusion Taskforce identified multiple structural vulnerabilities in the scheme that increase exposure to fraud and poor practice.

The Australian Criminal Intelligence Commission has also reported organised criminal activity involving cash kickbacks, financial manipulation and intimidation of participants in some cases.

Butler emphasised the focus was on providers and criminal actors, not participants or families.

Crackdown on plan management

Plan managers and intermediaries have become a key focus of reform.

One in five plans currently undergo unscheduled reassessments each year, often linked to plan management activity, resulting in an average 20 per cent increase in plan value.

The government says the NDIA has been unable to reduce this rate as intended.

Spending on plan managers and support coordinators will be reduced by around 30 per cent. The government also intends to move away from an open market model towards a shortlist of approved providers meeting stricter standards of conduct and capability.

Provider registration and payments

Butler noted that currently “you need more ID to get into a licensed club than to be an NDIS provider,” arguing this has contributed to inconsistent service quality. Mandatory registration will be expanded to cover providers delivering personal care, daily living supports and supports in closed settings.

A new digital payments system will require supporting documentation for claims and ensure providers are paid directly, improving visibility of transactions that are currently difficult to track.

Slower growth ahead

The NDIS will continue to grow each year, but at a significantly slower rate — around 2 per cent annually in the short term before returning to around 5 per cent from 2030.

The Scheme Actuary recently advised government of a $13 billion increase in projected costs over four years. Under the new settings, spending is expected to reach around $55 billion by 2030, rather than more than $70 billion under previous projections.

What is not changing immediately

Essential daily supports — including personal care, hygiene, continence, medication management and transport for daily needs — are not being targeted for cuts.

No one will lose access to the NDIS immediately as a result of these changes, and most reforms will be implemented over time through legislation and consultation.

Delayed planning reforms

The New Framework Planning rollout has been pushed back from July this year to April 2027 due to legislative uncertainty and the need to avoid unintended consequences, according to the NDIS Reform Advisory Committee.

Public confidence under pressure

Research by Talbot Mills shows community confidence in the scheme is under strain. While most Australians still support the NDIS, many believe it has become too large and is affected by poor provider behaviour.

More than six in ten now describe the scheme as “broken.”

The government says the NDIS is not being dismantled, but reshaped. It will continue to grow, but more slowly, with tighter eligibility and more people expected to be supported outside the scheme over time.

Over the coming year, further detail will be released on how functional assessments will work, what alternative supports will look like, and how transitions in provider and plan management settings will be managed.