The sustainability of a once world-leading disability scheme is on the line as the federal government tries to push an overhaul through parliament despite furore from state leaders.

The legislation, which will be introduced to the House of Representatives on Wednesday, addresses recommendations made by an independent review into the National Disability Insurance Scheme (NDIS), released in late 2023.

It would bolster the powers of the NDIS watchdog to safeguard the scheme and protect participants from illegal and unethical conduct, and is aimed at ensuring the money committed to the scheme goes to the appropriate people.

NDIS Minister Bill Shorten said it would provide life-changing outcomes for future generations of Australians with disabilities.

“This legislation and rule changes will be transformative to the lives of current and future NDIS participants, and the perspectives of people with disability must be centre stage as we deliver these reforms,” he said.

However, the passage of the bill is just the first step in creating change.

Many improvements cannot take effect until NDIS rules – made with the states and territories – are updated.

But premiers and chief ministers have threatened to revolt, fearing they will be left paying for future NDIS budget blow outs.

The cost of the NDIS – hailed as world-leading when it was established in 2013 – supports about 631,000 Australians and is predicted to swell from $33.9 billion in 2022/23 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 as part of a broader overhaul.

The state and territory leaders emerged from a meeting on Monday calling for a delay the introduction of changes previously agreed at national cabinet.

This includes providing “foundational supports” via state systems to 2.5 million disabled Australians in an attempt to reduce pressure on the NDIS while still providing resources to those who need them.

However, NSW Premier Chris Minns said this would lead more people to seek state support at a cost unknown to his government, while his Victorian counterpart Jacinta Allan says the new legislation goes far beyond what was agreed to in December.

National cabinet agreed to the changes based on the understanding that the states would be involved in their design, Minns said.