Payments of €2,000 each are to be made to around 20,000 people in publicly funded residential care who had 75 per cent of their pensions or other allowances deducted to help to pay for their care.
All full-time patients of public nursing homes, mental hospitals and residential units for people with disabilities will be entitled to the once-off ex-gratia payments after the system used to take their contributions was deemed "legally unsound". Patients in private institutions whose beds are contracted out by the State will also be covered by the scheme.
The €40 million Government package will apply to residents of all ages and will also apply to former residents who are no longer in the full-time care of the State.
All those entitled to the payment will be required to apply directly to the interim Health Service Executive, which will advertise the scheme early next year.
While the practice of taking contributions from pensions and other allowances was suspended last week, the scheme will restart once the Government rushes legislation through the Dáil tomorrow.
The package was rejected last night by the Labour Party, which said the money amounted to only one-third of the contributions taken every year from residents of long-stay institutions.
A spokesman for the Minister for Health, Ms Harney, said it would have been "financially irresponsible" to make bigger payments.
However, Labour's health spokeswoman, Ms Liz McManus, said the affair raised "fundamental questions" about the Government's competence and its failure to respond to legal advice that highlighted problems with the system two years ago.
The package was sanctioned after the Attorney General confirmed that the practice of taking contributions from pensions and other allowances was "legally unsound".
The Fine Gael leader, Mr Enda Kenny, whose party first raised questions about the practice, said Ms Harney should explain why her Department "failed to act sooner" on the information it had received.
Ms Harney's spokesman said the Government "has never been informed until the last few weeks" about the difficulty.
He said it was for Ms Harney's predecessor, Mr Micheál Martin, to say whether he knew of the problem. There was no comment last night from Mr Martin's spokeswoman. However, Department of Health officials said it had made an "assumption" there were grounds to continue the practice and review it in new legislation on the general entitlements to health services.
Ms Harney said successive governments believed it was fair that those receiving long-term care should make some payment towards accommodation and daily living costs.
She has insisted that there was no question of refunding money that was taken in "good faith".
