Last week the government unveiled plans to reduce the number of people in the National Disability Insurance Scheme (NDIS) by 160,000 over the next four years, a decision NDIS Minister Mark Butler has called "hard" but "unavoidable and urgent".

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This reduction will rely on tightening the eligibility criteria.

A new assessment tool, likely based on an algorithm, will work out how much someone's disability affects their daily life - known as their "functional capacity".

Under the new rules, the threshold to access NDIS support will be higher. This means the day-to-day impact of disability will need to be more severe for someone to be eligible.

So what does functional capacity actually mean, and how will it be used to work out who's eligible? Will diagnosis still play a role? Here's what we know - and still don't know - about the new system.

Functional capacity is not new

The concept emerged in the mid-20th century as a way of capturing what a person with disability can do in everyday life, rather than focusing only on impairment or diagnosis.

This approach - which moves away from narrow, medicalised definitions of disability, to understand how social and environmental factors shape a person's level of functioning - is also endorsed by the World Health Organization.

Functional capacity is already central to determining eligibility for the NDIS. To meet the threshold, a person must demonstrate their disability is both permanent and substantially reduces their capacity to carry out everyday activities. This might include taking a shower, eating and drinking, moving about, and interacting with others.

The government says the reforms move the NDIS away from the "diagnosis gateway", meaning functional need will determine who gets support and at what level, rather than a diagnosis.

However, establishing permanence and functional capacity is still required by the legislation. In practice, this is difficult without reference to a specific diagnosis, meaning it is likely to remain a key point........

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