President Obama again trumpeted his claim last night, that we need government-run health insurance “to help keep the insurance companies honest.” He should check with his own Justice Department about dishonesty in government-run health plans.

The state and city governments in New York this week agreed to pay a $540 million fine, $440 million from the state and $100 million from the city, to settle accusations that they defrauded Medicaid. It’s a record-high Medicaid recovery from a public entity.

According to the Department of Justice press release, the governments “knowingly submitted” fraudulent claims.

The case had been under seal for ten years, according to media reports. But it wasn’t government that uncovered the mess. A speech therapist, Hedy M. Cirrincione, blew the whistle ten years ago and started private whistleblower lawsuits which the government eventually took over. A federal audit questioned over $1-billion in claims from the New York governments.

The whistle-blower is to receive $10-million of the recovery for her efforts.

As Reuters reports:

the claims involved reimbursement for school-based health care services, primarily speech therapy and transportation, provided to Medicaid-eligible children from 1990 to 2001.

The settlement represented a record federal recovery by the department for the Medicaid program, under which the federal government shares the cost of medical services for the poor and disabled with the states.

The programs at issue were developed jointly by New York’s education and health departments to assist local school districts, counties, and other schools in obtaining Medicaid reimbursement for covered diagnostic and health support services provided to students with disabilities.

The settlement resolved allegations the state passed on claims to the federal government for services it knew were not covered or properly documented, the department said.