The National Audit Office has examined concerns about people being wrongly fined over claiming free treatment, particularly involving visits to the dentist, when they really were eligible.
The public spending watchdog, examining penalty notices since 2014, found 30% of the fines levied were subsequently withdrawn, representing £188m in fines that had been wrongly issued.
Dentists have warned it is often vulnerable people, such as those with learning difficulties and disabilities, those on low incomes or carers bringing relatives with dementia, who get caught in the fining system.
“This is not a system that is working as it should,” said Meg Hillier, who chairs the Public Accounts Committee.
“The NHS must take urgent steps if it is to avoid causing unnecessary distress to patients, tripped up by an overly complex system, who end up facing large penalty charges.”
Charlotte Waite, of the British Dental Association, said: “England has a system built on a presumption of guilt, which offers few signposts, and has left vulnerable patients chased by debt collection agencies.”
The BDA has warned that many people facing the threat of fines will pay up rather than contest them, even though they are eligible for free care.
It said many of the wrong fines were the result of simple errors or confusions when filling in forms.