A report to be released on Tuesday found some ACT residents were worse off under the scheme, with one man left isolated in his home after a review cut tens of thousands of dollars in annual funding.

But the report also found while the NDIS is hard to navigate and overly bureaucratic, where it is working well it is changing lives.

The report by the Mental Health Community Coalition ACT draws on the experiences of not-for-profit community-based service providers, people with mental illness and their carers during the first three years of the NDIS in the ACT, which started in July 2015.

It is estimated there were more than 900 people with a psychosocial disability in the ACT who would be eligible for an NDIS as of 2017.

The report found the process of trying to prove a psychosocial disability, and then go over it again every year at an annual review, put people's recovery at risk.

"In testing eligibility for NDIS people must describe their deficits and the debilitating effects that the condition has on their lives," the report said.

"This in itself is a demeaning introduction to the scheme which doesn’t encourage a description of what people have done to overcome their conditions.

"Moreover, people feel that if they present too positively, they won’t receive the supports that they need. So they must dwell on and go into great detail about the limitations that mental illness imposes on them, rather than focusing on what they can do with support."

Another service provider said: "The NDIA has very little understanding of psychosocial disability and the damage that they can do to people with psychosocial disability by giving them funding, hope and a better quality of life one year and then taking it away the next year.

"This reinforces what has continually happened to them in the past."

After an annual review, one Canberra NDIS participant went from an annual funding package of $37,000 to just $2500.

He lost all his external supports and is possibly worse off than before the NDIS.

"An internal review was completed and sent to NDIS two months ago with an urgent status," the report said.

"We check it weekly for progress. To date there has been no progress with this review. The client, who has a psychosocial diagnosis, is now isolated within his home."

There were also concerns the one size fits all approach by the NDIS, which will often only employ people at a low or restrictive pay rate, meant skills were disappearing from the sector.

"The introduction of the NDIS has caused massive disruption across the mental health sector in the ACT," the report read.

"The ACT will not be well served into the future by financially vulnerable organisations, which are being driven to employ a lower-skilled more casualised workforce with a high churn rate, delivering a narrow range of highly commodified services."

The community mental health sector has struggled during the two years of the trial and the first year of full rollout, the report said.

"A fundamental issue is that the NDIS framework does not adequately cater for the complexities and specificities of psychosocial disability," the report said.

The coalition's executive officer Simon Viereck said funding being moved from existing services to the NDIS had also left support gaps for people who are not participants in the scheme.

“This is very concerning," he said.

"The NDIS was never intended to replace the mental health system. People with mental illness need both."

He said while some people had found the NDIS life changing, there were too many people whose lives had been made more difficult.

"We certainly note that for some individuals it has been absolutely life changing, for some carers that experience it suddenly they know there's going to be someone to look after their loved one," Mr Viereck said.

"But we also know that for quite a lot of people it's been really difficult and actually quite traumatic.

"We have to recognise there are people who have been hurt in this transition process.

"Things are changing but but certainly not fast enough for some people."

The report - When the NDIS came to the ACT - will be launched on Tuesday at the ACT Legislative Assembly.