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At least 160,000 people are expected to be removed from the national disability insurance scheme by 2030, as the Albanese government looks to claw back savings by changing who can access the scheme.

The health minister, Mark Butler, unveiled a massive overhaul of the $50bn scheme on Wednesday, announcing the growth rate will be brought down to just 2% every year until 2030 in an effort to curb annual plan inflation and produce billions in savings.

The government will dramatically increase the categories of service providers required to register , adding more higher risk activities, including personal care, daily living supports, and supports provided in closed settings.

But the opposition, the Greens and disability advocates have warned vulnerable Australians could be cut out of the scheme with nowhere to turn for support and services.

Speaking at the National Press Club in Canberra ahead of the 12 May federal budget, Butler said unannounced changes to eligibility rules would reduce the number of people using the scheme to about 600,000 by 2030, down from forecasts of 900,000 participants.

There are about 760,000 people on the scheme at the moment, meaning at least 160,000 will no longer be able to access the NDIS within four years.

“These are hard decisions – but they’re unavoidable and urgent,” Butler said.

Instead of costing more than $70bn at the end of the decade, the NDIS budget will be brought down to about $55bn.

“The NDIS costs too much and is growing too fast, put alongside any comparable government program,” Butler said.

“And unless we take action to make it sustainable, it simply will not be there in the future for the Australians who need it most.”

The scheme’s cost grew by more than 10.3% last year and it had been on track to cost $63bn by 2028-29. Without changes, it was projected to support more than 1 million participants by 2033 and to reach $95.8bn in 2034-35.

‘Significant’ impacts feared

Martin Laverty, one of the architects of the NDIS’ design and boss of disability provider Aruma, said the changes would be significant.

“Direct commissioning of disability accommodation, plan management and support coordination will be a gamechanger,” he said.

But George Taleporos, the chair of the Every Australian Counts campaign, said the move to reduce NDIS enrolment numbers and increase registration requirements were deeply concerning.

“The promise of the NDIS was that people with disability would have the support, choice and control to live ordinary lives in the community, and that promise must not be broken.”

The changes look likely to start a new war of words with the states and territories, and face opposition from disability advocates and the Greens.

The Greens’ leader, Larissa Waters, pledged to fight Labor in parliament.

“How dare this government, who promised they wouldn’t cut the NDIS, balance their budget by selling disabled people’s dignity,” Waters said.

Queensland’s disability minister, Amanda Camm, said costs would be shifted to the states, coming with “little detail and, once again, little consultation”.

She called the NDIS a “runaway train”.

“It will be our state and other states and territories that will pay for the failures,” she said.

Bill Shorten, the former NDIS minister and the politician credited with its creation in the last Labor government, said new support mechanisms for people being removed from the scheme were necessary.

“To be fair to the current government, the first time we did a review, we spoke to tens of thousands of people and what was clear is the NDIS can’t be the only lifeboat in the ocean.

“There are a lot of people of goodwill in the states. They are paranoid about cost-shifting, and I guess that’s right, they have their own budgetary challenges, but I think what we’ve got to do is not start with a question of the budget, although that’s always very important, but start what’s in the best interest [of] people with disability.”

The shadow NDIS minister, Melissa McIntosh, welcomed provider registration and digital payment but said more work was needed to stop fraud. Labor is yet to consult the Coalition on the changes.

McIntosh warned vulnerable people could not be left without care.

“Mark Butler said every single participant on the NDIS needs to be reassessed, so does that mean somebody who is on a breathing tube, or needs to have a feeding tube? I think that’s pretty unfair if that’s the way we are going here.

“If we have these potentially hundreds of thousands of people coming off the NDIS, where are they going to go?”

Guardian Australia revealed earlier this month Labor had quietly established a razor gang to drive budget savings in the NDIS. Led by former Treasury official Anthea Long, the taskforce in the health department was launched after the 30 January national cabinet meeting.

Queensland is yet to sign an operating deal for the new Thriving Kids program, due to begin in October. Announced by Butler in August, it is designed to support children with autism and developmental delays.

The Australian Criminal Intelligence Commission (ACIC) warned this week organised crime gangs are using the scheme to launder money, earn income and hide assets, seriously undermining probity in the $50bn program.