A daily payment for severe dementia sufferers is being scrapped because it's costing the federal government too much.
Prime Minister Tony Abbott says his government is ceasing the $16 a day dementia and severe behaviours supplement from July 31 after discovering a 10-fold cost blowout.
The payment was intended to help 2000 people in residential care with severe dementia but more than 25,000 people are now claiming it.
About $11.7 million was budgeted for the payment this financial year but that amount was spent in January alone.
If left unchanged, the payment will cost $1.5 billion over 10 years.
Mr Abbott on Thursday said the payment was poorly-designed Labor policy.
The government is now consulting with the aged-care sector on a "better" option of dealing with severe dementia.
The Department of Social Services in June said it was unlikely that 25,000 aged-care residents would exhibit "extreme behaviour" associated with severe dementia, based on its discussions with clinicians.
It formulated the policy based on recommendations only 2000 people presented with such behaviours.
Angry aged care providers, which receive the payment directly, said the government's knee-jerk reaction ignored the reality that there were many people with dementia.
"There is a substantial body of residents in aged care with significant dementia-related behaviours," Aged and Community Services Australia chief executive John Kelly said.
He's received many calls from providers saying about 80 per cent of their residents had some form of dementia.
He criticised the lack of dialogue before the payment was scrapped, and was pessimistic about the government's promise of an alternative.
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