Announced in the May federal budget, a $5000 threshold for veterans' allied health services is set to be imposed from July 2027. Further spending would be subject to government scrutiny to determine if it was effective.
The announcement had caused trauma for hundreds of returned service men and women whose wellbeing was on the line, Tasmanian Independent Senator Jacquie Lambie told News24 on Tuesday.
"What you'll see is the suicide rate going back up again. That's what you'll see," she said, warning veterans would feel unable to care for themselves.
Highly decorated veterans on Monday laid down their medals at Parliament House's Federation Mall in protest of the cap. It was the second time they had travelled to Canberra to do so.
The group voiced their concerns to Veterans' Affairs Minister Matt Keogh before meeting with Prime Minister Anthony Albanese later on Monday.
Senator Lambie made an impassioned plea on the floor of parliament in August, telling the government how quickly she had ripped through funding to fix a prolapsed vagina and bladder. She said it was directly connected to back injuries sustained during her time in the army.
"I'm begging you, Prime Minister. We are already suffering enough. Drop the bloody cap. Drop it, mate," she told the Senate.
The federal government has argued the changes would reduce the burden for doctors and prevent health professionals from overcharging, but Senator Lambie said it was the wrong approach.
Money could be saved through better oversight of cleaners, gardeners and other home supports for veterans, she told reporters on Tuesday, claiming funds were spent on services for which workers did not turn up.
"We could have a gold-plated (veterans affairs department), but we do not," she said.
"They're not making the right moves. Honestly, it just needs some tweaking.''
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