Families will be able to write off "reasonable expenses" related to childcare, rent or mortgage payments, and work-related travel expenses when being assessed for eligibility for medical cards.
The changes to eligibility rules for medical cards, which come into force immediately, will see qualification determined by the disposable income of the applicant instead of the gross income.
Details of eligibility rules for medical cards were published in yesterday's newspapers, and are available on the website of the Health Service Executive (www.hse.ie).
They also include eligibility guidelines for new "doctor-only" medical cards which will benefit up to 200,000 people.
The HSE has asked applicants to contact their local health office, or to visit the HSE website, to determine if they are eligible for medical cards.
In a statement yesterday, Labour's health spokeswoman Liz McManus said she had been contacted by older medical card-holders, who were frightened that they would lose their cards.
She said the advert suggested that income limits would be applied to married couples over the age of 70 and called on Minister for Health Mary Harney to clarify the details.
However, a spokesman for Ms Harney said the limits applied to a person who was under 70, but whose spouse was over 70.
He said there was no policy change and that new eligibility guidelines would benefit more people.
"The new eligibility criteria will target families and low-income applicants in a much fairer and more effective way," the spokesman said.
The changes include new income thresholds for medical cards, which include €136.50 for a single person aged up to 65 living with their family; €153.50 for a single person living alone aged up to 65; €222 for a married couple aged up to 65; and €248.50 for a couple aged between 66 and 69. All over 70s are entitled to free medical cards.
These income thresholds for doctor-only medical cards include €171 for a single person aged up to 65 living with their family; €192 for a single person aged up to 65 living alone; €277.50 for a married couple aged up to 65; and €311 for a married couple aged between 66 and 69.
The same assessment process, including the writing-off of childcare, mortgage and certain travel costs, will apply to these doctor-only medical cards.
The Department of Health believes income guidelines for medical cards, which were increased by 7.5 per cent or twice the rate of inflation last November, have been falling behind rises in wages.
This has meant that, despite Government pledges to provide 30,000 additional medical cards this year, the numbers covered by the free GP and drugs scheme are continuing to fall.