A new survey of a sample of the country's 350,000 beneficiaries suggests this but does not break that down into how many are getting too much - versus those getting too little.
Beneficiaries advocate Kay Brereton said what they have warned of for years, was now official.
"It's shocking" but not surprising, and significant because it proved there was a systemic problem, she said.
"What we want to know is what happens next?"
The internal survey that MSD ran for a year, and which is still being number-crunched, showed as of June 30, some 57 percent were getting what they should be paid and 43 percent were not.
"In these instances, our staff worked to correct these payments accordingly," the director of a $2 billion programme to overhaul the ministry's payments systems, Craig Hill, said in a statement on Thursday.
But Brereton said that only applied to those in the survey - about 1200 beneficiaries took part in it - not the other 150,000 affected - and she was sure most of those would have been underpaid rather than overpaid.
She had seen the early unreleased results of the entitlements survey from an MSD ethics committee she sat on and said: "In the main what they found, as I understand it, is people who should have been receiving more."
Her experience of doing advocacy since 2006 was this was much more likely, said Brereton who is also the co-convenor of the national beneficiary advocacy consultancy group.
The ministry and Minister were also aware of those not on a benefit at all, yet who were entitled to the accommodation supplement or childcare support, or, most commonly perhaps, the hard-to-apply for disability allowance, she said.
MSD's Hill listed several probable causes for the wrong payouts, including gaps in information about clients, due to the interactions of clients, staff, or technology.
However, documents also showed MSD's decades-old IT systems were a huge hurdle.
"To assess eligibility and entitlement staff must go between as many as 10 systems requiring re-keying of information, separate logins, and switching between multiple screens," said a report into the overhauling of the IT systems.
"The different applications have different rules, calculations, and payment functions that do not allow for one source of truth or easily accessible data on a client and their circumstances. As a consequence, staff struggle to provide our clients with full and correct entitlement."
The ministry has embarked on a 10-year, $2 billion-plus plan to fix its systems.
Brereton said an IT fix would not get around making applicants jump through just too many boxes.
