The Minister for Older People Kathleen Lynch has admitted the money is not there for more long-term nursing home care for people.
Earlier this month applications for the 'fair deal' scheme had to be suspended after money ran out.
It is understood that €100m from the fund was used to pay for other services and will need to be recovered.
But Ms Lynch said the demand for care under fair deal is more than the money is there for.
Ms Lynch said: "The days of spinning a message is long gone - I think we have to be honest and open with people.
"There's a shortfall - a substantial shortfall - in the funding necessary in order to provide a long-term care for our elderly people; and not so elderly, in some cases."