The Morrison government has been forced to dump plans to introduce independent assessments for National Disability Insurance Scheme participants, in what has been hailed as a major win for the disability community.
NDIS Minister Linda Reynolds had asked her state and territory counterparts to endorse the government's planned shake-up of the scheme at a crunch meeting on Friday.
But the state ministers stood firm and blocked the controversial proposal, delivering a major blow to Senator Reynolds and the Morrison government.
Senator Reynolds confirmed late on Friday independent assessments would be abandoned, with the states agreeing to instead work with the disability community to design a new "person-centred model".
The decision represents a substantial backdown from Senator Reynolds, who had been steadfastly committed to independent assessments amid concerns the existing system was "inherently unfair".
She had argued the wider package of reforms was also needed to make the scheme simpler for participants and affordable for taxpayers.
Disability groups, Labor and the Greens have fiercely opposed the proposed new assessment process, which would have seen government-contracted professionals used to test participants' functional capacity.
ACT Minister for Disability Emma Davidson, who has been a vocal opponent of independent assessments, hailed the outcome as a major win for Canberra's disability community.
"This is a massive win for the sector and it is clear that the voices of people with disability were heard loud and clear in today's meeting," she said.
"We look forward to co-designing a new model with the community towards a more equitable scheme."
Labor's NDIS spokesman Bill Shorten said participants could breathe a "sigh of relief" after the Morrison government's retreat.
"This is a win for the good guys," he told The Canberra Times.
Mr Shorten said questions now had to be asked about the architects of the reforms, including the National Disability Insurance Agency's chief executive Martin Hoffman.
In her post-meeting statement, Senator Reynolds said ministers had discussed a "pathway" to introduce legislation to deliver other parts of the overhaul during federal parliament's spring sittings, but did not provide further detail.
She said there was also a shared commitment to examine the assumptions which underpin the agency's secret modelling on the scheme's cost.
The agency's latest projections showed the scheme's cost rise to as much as $60 billion a year by 2030, a figure well beyond any previous forecast.
Ahead of the meeting, Ms Davidson told The Canberra Times there was "absolutely no way" she could endorse the sweeping legislative overhaul because she hadn't even seen the draft bill.
Dressed in a T-shirt with the slogan "Hands Off The NDIS", Ms Davidson said she remained opposed to the introduction of assessments despite the major changes flagged earlier this week.
"Fundamentally, people with disabilities do not want strangers coming into their homes, checking things off a list and putting them into a box - that isn't the NDIS that they want," she said.
Ms Davidson called for more transparency on the financial state of the NDIS and commitment from the Morrison government to genuinely listen and consult with the disability community on the future of the scheme.
Advocacy for Inclusion chief executive Nicolas Lawler thanked Ms Davidson for the voicing the concerns of Canberra's disability community.
"We are scared of the direction in which the NDIS is being driven," he said.