The Morrison government has been forced to abandon its controversial plan to introduce independent assessments to the national disability insurance scheme after it was rejected by state and territory ministers.
The federal NDIS minister, Linda Reynolds, met with her counterparts on Friday to seek “in principle” agreement for sweeping changes to the scheme as revealed by Guardian Australia last weekend.
But Reynolds confirmed on Friday night that independent assessments – which have sparked a massive backlash among the disability sector – would “not proceed”.
The Coalition had wanted to force 450,000 NDIS participants and new applicants to undergo an interview with a government-contracted allied health professional – rather than submitting reports from their own treating specialists and doctors.
El Gibbs, a spokesperson for advocacy group Every Australian Counts, said the community was glad the states and territories had listened to the sustained campaigning of disability groups.
“Minister Reynolds and the [National Disability Insurance Agency] now need to commit to working with us to make the NDIS deliver on its promise,” she said on Friday.
The Greens senator Jordon Steele-John, who lives with cerebral palsy, said the outcome was “a beautiful thing”.
“I am so proud of the work everyone has done this week,” he said. “It’s incredible. [People with disability] made politicians listen to them today. They proved their power.”
The outcome is a major backdown for the government, which had been warning the scheme was set to cost $60bn a year by 2030 – more than double the current cost.
Reynolds herself described the figure as “eye-watering”, but states and territories have noted the government said only last year that the scheme’s finances were on track.
Labor’s NDIS spokesman, Bill Shorten, had compared the financial warnings to claims about weapons of mass destruction in Iraq.
Shorten, who campaigned against the changes, told Guardian Australia on Friday the backdown showed the government’s figures were questionable.
“It makes you wonder, they’re breathlessly inflating the numbers of a financial crisis ... and now apparently it’s not that important,” Shorten said.
“If they actually believed what they’re saying, they’d be pushing. I think that proves my hypothesis that a lot of this was just disaster war-gaming from them.”
State and territory ministers raised concerns about data transparency with Reynolds on Friday. She confirmed the government would agree to “undertake further work to understand the assumptions and cost drivers that underpin the actuarial modelling”.
“This will allow ministers to form a unified understanding in order to develop a pathway forward together,” Reynolds said.
Instead of the independent assessments, Reynolds said the ministers had agreed to work with disability groups on the “design of a person-centred model” that would “deliver consistency and equity of both access and planning outcomes”.
Independent assessments were proposed to address what the government said were increasingly inconsistent decisions about package sizes and eligibility, but the disability community viewed them as a cost-cutting measure. Guardian Australia revealed in April that secret government documents showed the assessments would reduce package sizes for participants on average.
The government later changed tack, saying the assessments were needed to address what it claimed was the scheme’s unsustainable growth trajectory.
The Western Australian disability minister, Don Punch, said on Friday the assessments plan had been “based upon unsubstantiated financial assumptions and wholly inadequate consultation”.
The New South Wales disability minister, Alister Henskens, said his state had “continually sought transparency around the scheme’s financial and actuarial data”.
The assessments were part of a broader overhaul of the scheme, which the government hoped would include a change to the “reasonable and necessary” test which determines what support a person can receive and a specific ban of certain goods and services considered “ordinary living expenses”.
It was unclear whether the government would proceed with those measures but the states and territories did not agree to any of them on Friday.
Reynolds said only that ministers would talk further about a “pathway for NDIS legislation”. That would include reforms to ensure participants received more timely decisions from the agency – known as the participant service guarantee – as well as a response to the recommendations of the Tune Review and measures to address fraud and unscrupulous provider practices.
