Australia’s National Disability Insurance Scheme, once hailed as one of the country’s most ambitious social policy reforms, is undergoing its most significant restructuring since its creation as the Albanese government moves to curb rising costs and restore what ministers describe as long-term sustainability.

The federal government this week announced sweeping changes to the NDIS, including tighter eligibility rules and mandatory independent functional assessments for all participants, in a package projected to save the budget A$35 billion over four years.

The reforms come as annual scheme costs approach A$50 billion and concerns intensify over whether the system can remain financially viable in its current form.David Bowen, the inaugural chief executive of the National Disability Insurance Agency, said the scale the scheme has reached would likely have prevented it from being approved had governments anticipated its current size.

“Had any government, of any political persuasion, known it was going to be this size, by this time, it would have never been funded in the first place,” Bowen said.The NDIS was introduced following a landmark 2011 Productivity Commission report, which described Australia’s previous disability support framework as underfunded, fragmented and inefficient.

The commission proposed a national insurance model that would provide individualised support for people with permanent and significant disabilities, replacing the inconsistent state-based systems that had long drawn criticism.At full implementation, the scheme was expected to support around 410,000 Australians and cost approximately A$13.5 billion annually. Alongside it, a second level of support—known as tier two was intended to provide broader community-based assistance for the roughly four million Australians living with disability who would not qualify for individualised packages under the NDIS.The commission argued that while the upfront costs would be substantial, the long-term economic and social benefits would significantly outweigh the expenditure.

Over time, however, participation and costs expanded far beyond original projections. Health Minister Mark Butler said the growth was driven by both structural design flaws and implementation failures, including poor market regulation and an eligibility system that allowed broader entry than originally intended.

Butler said the NDIS had become vulnerable to what he described as a “free-for-all” environment in parts of the support market, allowing some providers to exploit weak oversight while costs accelerated.He also said the eligibility framework had shifted away from assessing functional impairment toward diagnosis-based access, allowing significantly more people to enter the scheme than policymakers initially expected.

The largest area of growth has been autism-related participation. According to government figures, people with autism now account for 324,200 participants, representing 43% of all people currently enrolled in the NDIS.Bowen said that during the trial years of the scheme, an autism diagnosis alone was not sufficient for entry and eligibility was based more strictly on the level of functional impairment.

He said that changed after his retirement from the NDIA in 2017 and described the policy shift as one that broadened the scheme “incalculably.”In response to this expansion, Butler last year announced a jointly funded A$4 billion federal-state initiative known as Thriving Kids, aimed at supporting children under nine with mild developmental delays and autism outside the NDIS and reducing pressure on the scheme.

The government now plans to legislate a system under which every participant will undergo evidence-based independent assessments to determine both eligibility and the level of support required. The proposal mirrors, in part, reforms previously attempted by the Coalition government under Scott Morrison.

In 2021, the Coalition proposed mandatory independent assessments requiring participants to complete a three-hour interview with a government-contracted health professional. The plan was met with strong opposition from disability advocates, state governments and Labor, which accused the government at the time of undermining the scheme.

Labor campaigned in the 2022 election on protecting the NDIS and criticised the Coalition over attempts to reduce access. After winning government, however, the fiscal reality of the scheme’s rapid expansion prompted a policy shift.Bill Shorten, appointed as NDIS minister, took charge of reforms to a system he had helped establish during the Gillard government.

He commissioned a major review led by Bruce Bonyhady, another key architect of the NDIS, which recommended creating a stronger system of foundational disability supports outside the scheme—effectively implementing the second-tier support model originally proposed by the Productivity Commission.

At the same time, Prime Minister Anthony Albanese secured agreement from national cabinet for the first formal annual growth target for NDIS costs, initially set at 8%.“We know that the trajectory of NDIS expenditure is just not sustainable into the future,” Albanese said after the April 2023 meeting, warning that without intervention the scheme could reach A$97 billion within a decade.Following another A$13 billion cost blowout, that target has now been revised further, with the government aiming to reduce annual growth to 2% until 2030.

The changes have triggered significant concern across the disability community, particularly among participants uncertain about how new eligibility rules and reassessments may affect their access to support.

Australian Disability Network chief executive El Gibbs and other advocates have warned that while reform is necessary, the political language surrounding cost containment risks framing disabled Australians as a financial burden rather than citizens entitled to support.

Disability advocacy groups say many participants remain deeply anxious about what the reforms will mean in practice, especially for families who rely on the scheme for daily care, therapy and independence.

Australian Federation of Disability Organisations chief executive Ross Joyce Bennison said uncertainty around the reforms had created widespread fear among participants.“I think people are also feeling like they’re being heralded as a burden on society,” Bennison said.“It feels really not very nice to be a disabled person in Australia at the moment.”

As parliament prepares to consider the legislation next month, the government faces the challenge of balancing fiscal restraint with preserving confidence in one of Australia’s largest and most politically sensitive social programs.