An estimated five per cent of the National Disability Insurance Scheme spending, about $2 billion, is not being used for genuine needs, National Disability Insurance Agency integrity chief John Dardo told a budget estimates hearing on Monday.
Some NDIS providers have allegedly forced participants to give cash to criminals for drugs and encouraged participants to engage in fraud, with revelations tens of thousands was spent on holidays and $73,000 on a new car.
Health Minister Mark Butler said there were too many dodgy NDIS providers.
"It's incredibly alarming," he told the Today Show on Wednesday.
"This is a terrific scheme that's providing support to people with disability.
"But we know there's simply too much waste, there are too many rorts, there's certainly too many dodgy providers."
Mark Butler says the government aims to crack down on dodgy providers. (Mick Tsikas/AAP PHOTOS)
The cost of the NDIS is expected to swell to more than $50 billion in 2025/26, higher than the annual bill for Medicare.
To prevent the scheme eating into other parts of the federal budget, the Albanese government is trying to limit spending growth to eight per cent.
Laws before federal parliament aimed at overhauling parts of the disability scheme would require participants to carry out fresh assessments and receive a plan and budget based on their needs.
Money provided could then only be spent in accordance with their plan unless needs change significantly, with the government also able to create a list of services available as part of NDIS funding.
Deputy opposition leader Sussan Ley said the NDIS needed to be protected.
"We can't have a situation where the NDIS money - which is taxpayers' money - is being spent on drugs, on mortgages, on things that ordinary Australians would think are ridiculous," she told Sky News.
"We have to protect the NDIS because it needs to be there for the people who desperately do need it now."
The government in May vowed to crack down on disability service providers who encourage participants to misuse their funding.
For the 12 months to February 2024, overspending, also known as intra-plan inflation, drove more than $3.3 billion in additional NDIS costs.
More than 100,000 participants, 15 per cent, overspent their plan budgets before the end of the plan period.
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