The Federal Government has cut the dementia and severe behaviours supplement, paid to providers of care for people with severe behavioural and psychological symptoms of dementia.

Assistant Minister for Social Services Mitch Fifield has told the Senate the Government had no choice but to eliminate the supplement as of July 31, after its budget blew out by nearly 10 times over.

"I have not taken this decision lightly," Senator Fifield said.

"But there was no other responsible course of action in the circumstances."

The dementia and severe behaviours supplement is only a year old. It provides a payment of $16 a day for each eligible dementia patient in residential care homes.

Figures released by the Department of Social Services show demand for the payment has dramatically outstripped initial projections.

Original estimates indicated 2,000 people in residential care would be eligible. Instead, as of March, more than 25,000 people were receiving the supplement.

The budget for the payment expanded accordingly, from an initial estimate of $11.7 million to $110 million this year.

Loss will impact care, providers say

The peak body for not-for-profit residential care, Aged and Community Services Australia, says the number of those applying for the supplement should not have been a surprise.

"The Government, in creating this very necessary supplement, has grossly underestimated the number of people who should be eligible," the organisation's CEO John Kelly said.

He says losing the supplement will impact care.

"It enables my members across 1,800 facilities around Australia to provide extra support," he said.

"They may be able to put on a specialist, they may be able to put on a person with dementia training ...we're going to miss out on that."

But Alzheimer's Australia CEO Glen Rees says it was clear to his organisation that the supplement had gone off track.

He says the intent was good. The payment was designed to encourage residential care providers to provide more spaces for dementia sufferers with severe behavioural problems – some of the most difficult people to provide care for in Australia.

He says not long after the supplement was launched, it was clear there was a problem: there was no test to determine whether the providers who applied for the supplement could actually provide the appropriate care.

"From our point of view, it was always subject to error because the scheme wasn't accompanied by any definition of those providers likely to able to provide this most difficult level of care," Mr Rees said.

Result a 'travesty' for dementia sufferers

The result was far more recipients than anticipated, and a budget the Government says could reach $1.5 billion over the next 10 years.

Senator Fifield says it is the previous government, which launched the supplement, that should bear the blame.

"This is not a problem of the Government's making," Senator Fifield said.

"But it did fall to this Government to address the situation."

The Government says it remains committed to supporting those with sever behavioural problems and psychological symptoms of dementia.

Mr Kelly says he has heard nothing about future plans to replace the supplement that has been eliminated.

But he says most of those who received the supplement were legitimate. He points out there are 320,000 Australians with dementia now, and that number is expected to rise to 400,000 by 2021.

"Dementia is a chronic condition," he said.

"To think that you're going to pull money out of something that's been identified as a priority heath need and something that's intrinsic in the care of those older Australians, it's more than tragic. I think it's a travesty."

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