The Medicaid program in New York might have a pricey problem, tothe tune of some $1.4 billion or more.

Modern Healthcare reports that the state paid out all that moneyto long-term care providers who didn’t abide by the state’srules — and to top it off, the state failed to include language inits provider programs that would allow it to recover thatmoney.

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A federal report from the Office of the Inspector General foundthat numerous care providers failed to document patientassessments, provide community-based services or provide writtencare plans to patients. However, their contracts with the stateobligated them to fulfill all these requirements.

And according to the OIG report, in fiscal 2014 the state mayhave forked over more than $1.4 billion to these providers. Whilethe state could have gotten the money back, the contracts itexecuted with care providers lacked the appropriate language toallow it to recover payments from those who fail to meet theirlegal obligations. “This measure could have saved the Medicaidprogram $1.4 billion,” the OIG report says.

Not so fast, says New York.

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While Jason Helgerson, New York Medicaid director, says that thestate is working on improving its monitoring of care providers, hedisagrees with the report’s broader conclusions — such as getting areturn of funds of the size indicated in the OIG report.

Many items found not to be in compliance, he says, are simplepaperwork problems — not something that would justify demandingproviders to make full refunds to the state. Instead, hecharacterizes such an action as a “death penalty” and says thereport’s figure of $1.4 billion in savings is “a completemischaracterization.”

“They're suggesting that if any [provider] plan has any clericalerror — if they have any deficiencies — we should recoup entireyears of reimbursement,” Helgerson is quoted saying in the report.“If we were to basically ding them for a full year’s reimbursement,no one would ever sign that contract.”

Instead, he says the agency is examining the potential use offines to keep providers toeing the line. “We want full compliance,but at the same time we have to have a measured response.”