Around 20,000 people over the age of 70 will lose their full medical card under changes to eligibility.
Those affected are single people who have an income of €600 to €700 a week or couples with an income of €1,200 to €1,400 a week.
They will get a GP visit card instead. It means their GP visits will continue to be free but they will have to pay up to €144 a month for drugs.
Health Minister James Reilly also confirmed that the rules on household outgoings – which are taken into account in assessing eligibility for a full medical card – were also to be tightened.
This will see many existing card holders lose the benefit and will make it difficult for new applicants to qualify.
Under new means-test rules, people seeking medical cards can no longer include outgoings such as home improvement loans, second home loans, car depreciation and a travel-to-work allowance.
Junior Health Minister Kathleen Lynch also confirmed that the cost of nursing home care under the Fair Deal scheme was to become more expensive.
Currently, nursing home residents pay no more than 15pc of the value of their assets over three years. But this is to be increased to 22.5pc.
"The whole scheme is being reviewed. People will be paying more eventually when the asset is realised," she added.
Part of the review will look at giving people the choice of purchasing home care to stay in their own home instead of going into a nursing home.
Dr Reilly said "tough decisions" had to be made.
Under the new arrangements, 92pc of over-70s will have medical cards, 5pc will qualify for a GP visit card, and the wealthiest 3pc of people will have neither card – the same percentage as at the moment. After eligibility for a medical card for all over-70s regardless of income was axed in 2009, the eligibility criteria remained very generous.
Fianna Fail health spokesman Billy Kelleher said the move to restrict eligibility to the over-70s' medical card was the "the most shameless U-turn by one of the most shameless ministers to ever sit at Cabinet".
He said: "Four years ago, when faced with more generous eligibility criteria than he is now proposing, Mr Reilly was a model of fury and indignation in his opposition."
Meanwhile, an extra €35m for the development of mental health services is being allocated for 2013.
This will be used to hire more staff as well as for more investment in areas like suicide prevention.