Revealed in May, social participation budgets in the National Disability Insurance Scheme will be slashed by 50 per cent to curb the $50-billion-a-year scheme's growth.
The funding can be used for things like hobbies, grocery shopping, and getting to and being assisted with work.
Those with vision impairments and Down syndrome are likely to be most affected by the cuts, government modelling shows.
Greens disability spokesperson Jordon Steele-John said having community services "all mixed up together in the same pot" would stop many people, particularly those with Down syndrome, from being able to work or access meaningful group activities.
"How are you proposing then to reinforce the employment funding if it's just an across the board cut?" he said.
Health Department officials said the government did not intend to cut funding for work specifically, but did not confirm how they would stop that from happening.
"The intended cuts to social and community participation clearly will have an effect ... the category will still remain, it will just have less funding," health deputy secretary Mary Wood told a senate estimates hearing.
Advocacy groups such as Down Syndrome Australia, which has echoed Senator Steele-John's concerns, will only be consulted after the bill has passed.
Independent senator David Pocock said this form of consultation seemed pointless.
"The government has already baked this into the (federal) budget. If the 50 per cent cut is happening, what good is consultation after the fact?" Senator Pocock said.
"Many people with Down syndrome rely on their social and community participation budgets to work - something that they very much cherish."
If the bill passes, the health minister will be able to decide ratios of social and wellbeing support for people of different disability categories, rather than it being decided through assessment.
Meanwhile, the amount of taxpayer money spent dealing with disability complaints has surged.
The National Disability Insurance Agency has spent $170 million in the past three years fighting NDIS participants appealing decisions about their packages.
About $66 million has been spent in the current financial year, up from $60 million in 2024/25 and $44 million the year before that.
The agency resolved 1979 applications in the last quarter alone, after receiving almost 7000 in the financial year to March.
Three days of hearings into the NDIS bill will take place from Tuesday.
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