Tennessee’s Medicaid program, known as TennCare, may be forced to repay the federal government $400 million or more. An audit finds that the state agency inflated estimates of charity care.

While TennCare primarily funds health coverage for low-income and disabled patients, the questionable reimbursements are related to hospitals.

They often have to swallow the cost when people can’t pay their bills. But for 28 government-owned hospitals, TennCare helps offset that expense, and the money primarily comes from the federal government. Each year, the hospitals calculate how much went unpaid and are reimbursed through TennCare.

But in its audit published Thursday, Office of Inspector General in the federal Medicaid office found the state overshot by more than $1 billion dollars over a six-year period.

The state’s five behavioral health hospitals generated the largest share of costs, with more than $500 million “for which the state agency had no detailed supporting documentation,” the audit says.

TennCare director Stephen Smith says he’s “frustrated” because the time period in question goes back to 2009, when the rules were less clear.

“We’re going to actively refute the OIG findings,” he says. “We’re going to take all necessary steps in appeals to avoid any unwarranted repayment.”

If the state is required to pay back any money, Smith says it wouldn’t be for several years. But he plans to take the appeal to federal court, if necessary.