Julia Gillard says the Federal Government has reached an agreement with two Labor states and one territory to launch the National Disability Insurance Scheme (NDIS).
The states are South Australia and Tasmania and the territory is the ACT.
Ms Gillard said the Federal Government had made $1 billion available for launch sites.
"I am very disappointed that we have not been able today to strike an agreement with either NSW or Victoria or indeed Western Australia on hosting a launch site," the PM told reporters in Canberra.
Ms Gillard said an agreement with NSW would have meant 10,000 people in the Hunter region would have benefited.
If Victoria had participated some 5000 people in the Barwon region would have gained from the scheme.
"The Commonwealth contribution to these launches would have been around $300 million in NSW and $100 million in Victoria," the Prime Minister said.
"Unfortunately neither NSW nor Victoria was able to step forward with some relatively small amounts of additional financing to make these launches possible."
Ms Gillard said NSW and Victoria could still put proposals to her which she would consider.
She said NSW was asked to stump up $70 million and Victoria $40 million.
The PM said she had worked with her state and territory colleagues on a vision of a national disability insurance scheme.
"The next step towards this vision of fairness is launch sites," Ms Gillard said after today's COAG meeting.
"Making sure that around the country we see people better assisted than they are now (and) making sure that in different circumstances around the country we are best able to assess what the full model of the scheme should look like."
Ms Gillard said the launch site in South Australia would be for young people while Tasmania's would target adolescents and the entire region of the ACT would be covered.
She said each of the Labor jurisdictions stepped forward and was prepared to put money on the table and work with the Commonwealth under agreed governance arrangements.
South Australian Premier Jay Weatherill said the creation of a NDIS was "very important" to the nation and for his state.
"While the National Disability Insurance Scheme has up to this point been an idea today for the first time we are seeing the first concrete steps of putting it into place," Mr Weatherill told reporters.
Mr Weatherill said South Australia had prioritised disability funding under tight budget circumstances.
“Under this year's State Budget, the biggest single new spending was an extra $212 million for disability funding, which included earmarking $20 million over the next three years for the NDIS launch,” he said.
The SA Premier said the pilot scheme in South Australia would concentrate on young people from birth to 14 years old.
In South Australia, about 4800 children already receiving disability services plus newly eligible children will receive support and services as part of the launch.
During the first year, starting in July 2013, existing and newly eligible children aged 0 -5 years will be accepted to participate in the NDIS launch.
During the second year it is planned that existing and newly eligible children aged 0 -13 years will be included and in year three it is planned that all eligible children aged 0 -14 can be part of the scheme.
These arrangements will be reviewed after the first year to make sure the scheme is working as intended.
"We were particularly concerned in South Australia to focus on the early years because we believe in investment in the early years pays enormous benefits in later life for those young people."
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