The Health and Human Services Department on Wednesday rejected changes in Indiana's Medicaid plan that ban funding for Planned Parenthood, sending a warning to other states considering similar legislation.
GOP Gov. Mitch Daniels signed the state's plan last month, which barred funding for the reproductive health provider because one of the services its clinics offer is abortion.
In a letter sent to Indiana's Medicaid director, Medicaid Administrator Donald M. Berwick said Indiana's plan would improperly bar beneficiaries from receiving legal services. Federal law requires Medicaid beneficiaries to be able to obtain services from any qualified provider.
"Medicaid programs may not exclude qualified health care providers from providing services that are funded under the program because of a provider's scope of practice," Dr. Berwick wrote in a letter to Patricia Casanova, the director of Indiana's office of Medicaid Policy and Planning.
The letter sets up a clash with GOP lawmakers in Indianapolis and Washington, who immediately accused the Obama administration of overreaching.
HHS "should respect the will of Hoosiers who simply ask that their tax dollars do not subsidize an entity that maintains an abortion clinic," said Rep. Marlin A. Stutzman, Indiana Republican, who said he was "incredibly disappointed" by the letter. "The administration cannot quietly strong-arm state governments."
The Berwick letter said Indiana must change its plan to conform with federal law or it could face penalties. In the past, state Medicaid plans that did not conform with federal law have been changed by states before the federal government enforced any penalties.
In addition to Dr. Berwick's letter, HHS also posted a notice on Wednesday to other interested parties that sought to make clear that the department would take a dim view of efforts in other jurisdictions to impose similar bans.
The HHS notice emphasized that states may bar providers from participating in Medicaid in certain circumstances, such as if a provider is committing fraud or criminal acts.
"States are not, however, permitted to exclude providers from the program solely on the basis of the range of medical services they provide," according to the notice.
Medicaid is a federal-state partnership that nationwide covers more than 60 million low-income children and parents; seniors, including most nursing home residents; and disabled people of any age.
Federal law prohibits using any federal funds, including Medicaid funding, to provide abortions. While Planned Parenthood provides abortion services, it also provides other services, such as preventative care, cancer screenings and family planning, and is eligible to receive Medicaid funding for its other services.
Planned Parenthood operates 28 clinics in Indiana, four of which perform abortions. The state chapter has said federal funding makes up about 20 percent of its annual budget.