There is no evidence supporting an expansion of the cashless welfare card trials and such a move would further discriminate against Indigenous people, the peak body for Aboriginal controlled health groups has told a Senate inquiry.

The National Aboriginal Community Controlled Health Organisation (Naccho) released its submission amid increasing chatter from the federal government about a new trial of the welfare quarantining card in Tennant Creek.

Naccho said the more than $12,000 spent per person in the trials – which quarantine 80% of a person’s welfare income onto a card with restricted spending – would be better diverted to early intervention and primary healthcare.

“Naccho is strongly opposed to the current cashless debit card trials as well as any proposal to expand,” it said.

“We also note that Aboriginal people are disproportionately affected by the trials and that they are in and proposed for locations where the majority participants are Aboriginal. Whilst it is not the stated intent of the trials, its impact is discriminatory.”

Naccho cited a recent report by the National Audit Office, which determined it was unclear whether the program was actually reducing social harm.

The federal social services minister, Dan Tehan, said the government would push ahead regardless, and the identified concerns were being addressed.

An amendment bill, currently being examined by a Senate inquiry, seeks to expand the trial to the Bundaberg and Hervey Bay region and increase the number of participants to 15,000.

The trial sites are in or proposed for locations where the majority of participants are Indigenous.

“Whilst it is not the stated intent of the trials, its impact is discriminatory,” said Naccho.

“Naccho is strongly of the view that this funding could be more effectively spent on early intervention and primary healthcare strategies targeted towards reducing alcohol, drug and gambling-related harm.

“Notwithstanding our primary view that the trial funding should be redirected, a robust cost-benefit analysis should be undertaken prior to any expansion of the trials and this should be made public.”

Local support for a trial in the Bundaberg region has dropped amid revelations of the cost, and the mayor has withdrawn his support for a trial in the region.

On Sunday the prime minister visited Tennant Creek to hear about the town’s struggles with homelessness and overcrowding, alcohol and related violence and child-protection issues.

He and Tehan flagged active conversations around the town being a future cashless welfare card trial site.

However, Tennant Creek residents who receive welfare are already subject to the BasicsCard. The BasicsCard was introduced across the Northern Territory as part of the federal government’s 2007 intervention. It quarantines a smaller proportion of funds than the cashless welfare card being trialled, and can only be used at approved shops.

The audit office report found in 2012-13 that the direct cost of the BasicsCard couldn’t be isolated but the Department of Human Services estimated it was about $6,600 to $7,900 per person a year.

Some Tennant Creek residents have previously expressed concern to Guardian Australia the federal card would make it more difficult when they needed cash in the isolated and remote town.

Greens senator, Rachel Siewert urged the government “not to add another layer of stress” to Tennant Creek and instead to address underlying causes of trauma and crisis.

“To consider the cashless welfare card in a community that really needs support would be particularly dangerous,” Siewert said.

“We know that those struggling with addiction will find ways around the card, meanwhile carers, people on the disability pension and jobseekers will have their sense of independence taken away and further harm could be caused.”

On Sunday the social services minister, Dan Tehan, said the cashless debit card “has been raised with us by the local community” and the government would “continue to have those conversations”.

“If the local community thinks it’s a part of the suite of measures that are needed here, then obviously we would go forward with that, but that would very much depend on the local community being a willing partner in that process.”