"What the system has been doing up until now has been free rides on the family members.''
Mr Palairet was disappointed the Ministry of Health had contested the case three times, and he said it would be "dreadful'' if they took it to the Supreme Court.
"What they need to do is to take on board what the courts - plural - have said to them.
"We're really keen for the Government to shift its focus away from all the litigation and court stuff and to actually start looking for solutions.''
Health Minister Tony Ryall's office would not disclose whether the Ministry would take the case to the Supreme Court but said it was reviewing the decision.
"This decision has serious implications way beyond the disability sector,'' Mr Ryall said in a statement.
"Family carers make a special contribution to the care of people with disabilities in New Zealand.
"The Government recognises this is a difficult issue of balancing the interests of those who are being cared for, those doing the caring and taxpayers.''
Mr Ryall said the Government already provided about $250 million a year in support to family members for respite care and `time out.'.
Labour Party disabilities spokeswoman Clare Curran said the Government should be embarrassed by the Court of Appeal's decision and it should drop any further court proceedings.
"The Government now needs to get the parties together and work out a practical solution,'' she said.
Green MP Catherine Delahunty said the Ministry of Health and Crown Law had spent just under $1.4 million in legal action relating to the case.
"The years of legal action by the Government have been hard on the plaintiffs who have just been trying to get some financial assistance for the work they do caring for their disabled children,'' she said.
One of the parents who brought the case, Peter Atkinson, whose daughter has cerebral palsy and is confined to a wheelchair, said it was never about the money for him, it was a matter of principle.
The main issue for his family was that his daughter was allocated a carer two hours a day, five days a week, but they would often not show up.
"Although you had been allocated a number of hours, you were required to stay at home and provide that care. Why should you not receive that two hours' funding that has already been provided to the Ministry of Health? All we were asking was to be compensated for the time that was allocated but was never filled by the support organisation.''
Mr Atkinson, who appeared before the court on behalf of his wife Susan, who passed away before the Human Rights Review Tribunal heard the case, said his daughter needed care for all her needs.
"It's a labour of love and who knows what the cost of love is, who cares what the cost is,'' he said.
"But you can't just walk away from your funding obligations.''
