When legislation to establish the national disability insurance scheme was passed last year, it was hailed as a breakthrough. It was seen, quite rightly, as a win for dignity and choice for people with severe disabilities and for the people who care for them.

The Mental Health Council of Australia welcomed the Productivity Commission’s recommendation that psychosocial disability, often associated with mental illness, should be included in the scheme.

The reality is that many people with a psychosocial disability experience severe and lasting impacts on their everyday lives; impacts that reduce their ability to function and participate in society. In some cases this type of disability even results in the need for constant supervised care.

This week is National Mental Health Week, straddling World Mental Health Day on Thursday – a sensible time to look at the NDIS and psychosocial disability and the challenges to make it work for those most affected. The NDIS represents a philosophical change in the way services are delivered, placing resources into the hands of individuals living with disabilities and allowing them to choose the services that work for them.

This is an approach that the mental health sector considers essential to support a recovery journey.

However, as when any scheme like this is created, it would be unaffordable if it did not have clear entry criteria. Unfortunately, funding for health is never infinite, and herein lies the government’s first challenge: what is the entry criteria, and who makes the judgment about who is in, and who is out?

People with psychosocial disabilities often have complex support needs, but can also experience good days and bad. A fair and adequate assessment system should be in place that looks at whole-of-life situations and experiences, not just what is possible on a good day.

Another significant challenge is how the NDIS system will sit alongside other services. If important services are reduced in order to fund the NDIS, people may end up losing one set of services but not being eligible for the new set.

The NDIS ought not be an oasis in a desert – great if you make it there, but devastating if you don’t.

Numbers are an issue. The Productivity Commission made an assessment of the number of people with a psychosocial disability it believed would be eligible for the scheme. The MHCA believes this to be a large underestimate. Only time will tell.

Which brings us to the long-term sustainability of the scheme. When governments – federal and state – closed down most mental health institutions in the 1970s, which was the right thing to do at the time, the transition to new arrangements was not fully thought through.

Governments took away outmoded structures and supports, but didn’t create new ones, literally putting people on the streets. If Australia creates a system that people begin to rely on, the system must be there for the long term.

The Abbott government will need to take the time to look at these issues closely. It will need to work in tandem with the states and territories, and the mental health sector, to find solutions for these challenges. The MHCA will focus on ensuring a fair system of assessment; clarity on eligibility criteria that identifies people who genuinely need support; while also ensuring people left outside the scheme are not worse off.

Australia must create an NDIS that will have a true and meaningful impact where it is needed – supporting hundreds of thousands who have a psychosocial disability or look after someone who does. That’s the right thing for a wealthy and caring country to do.

Frank Quinlan is chief executive of the Mental Health Council of Australia.

This column first appeared in The Australian on 7 October, 2013.