Indiana and CMS clash over denying taxpayer funding to Planned Parenthood

As a result of the Indiana legislature voting to cut off $3 million in federal money from Planned Parenthood because it provides abortion services, the state's Planned Parenthood clinics stopped treating Medicaid patients, but a June 24 federal district court ruling blocked provisions of the state law.

"As far as we know, what Indiana is doing is new," says Rachel Benson Gold, director of policy analysis and Washington office operations at the Guttmacher Institute in Washington, DC. "Efforts in other states to restrict family planning funding have dealt with whether the organizations can receive state family planning funds, and none have ever reached Medicaid," she says.

On June 1, Donald Berwick, administrator of the Centers for Medicare & Medicaid Services (CMS), denied Indiana's request to block agencies that use their own, private funds to provide abortion services from being able to receive Medicaid reimbursement for family planning services to individuals enrolled in the program.

In a letter to the state, along with separate guidance issued by the agency to all states, CMS said that although states may exclude providers in cases such as fraud or other criminal activity, they are not permitted to exclude providers "solely on the basis of the range of medical services they provide."

"The Medicaid statute specifically permits enrollees to obtain services from any agency that is qualified and willing to provide the care," says Ms. Gold, adding that the guidance specifies that states "may not exclude qualified health care providers...from providing services under the program because they separately provide abortion services."

The state has 60 days to appeal the CMS decision, and indications are that it is likely to do so, says Ms. Gold. "According to media accounts, failure to comply with the agency's decision could jeopardize more than $4 billion the state receives in federal Medicaid reimbursement annually," she says.

In this situation, "all of the legal protections paradoxically are on the state side," says Sara Rosenbaum, JD, chair of the Department of Health Policy at the School of Public Health and Health Services at The George Washington University Medical Center in Washington, DC.

"Beneficiaries have been deprived of access, but the state has legal protections against the denial of funds even as the secretary issues what is unquestionably a correct ruling," says Ms. Rosenbaum.

A state has due process protection under federal law, Ms. Rosenbaum explains, and can therefore refuse to concur with the U.S. Department of Health and Human Services (HHS)'s decision. "Unlike a court, which has injunctive powers and can hold things in the status quo while the merits are decided, the secretary lacks such powers," she says. "It could be years until the question of whether HHS is right or wrong in finding Indiana out of compliance is decided."

Is HHS within its powers?

"The whole point of Medicaid in 1965 was to open up a broad array of services to poor people," says Ms. Rosenbaum. "You can't cut off access to providers that are capable of performing a service, just because they do other things that Medicaid doesn't pay for."

While the state certainly has the right to contest the federal interpretation, Ms. Rosenbaum says that HHS was "well within its powers. This is an incredibly important issue that goes to the heart of the whole program. It has to step in at some point to protect the integrity of the program."

Other states are likely to follow suit, says Ms. Rosenbaum because they believe they have broad power to decide who is a qualified provider. "There never has been a case precisely like this one," she notes. While there have been many freedom of choice cases, says Ms. Rosenbaum, she's unaware of any that deal directly with the question of whether a provider can be kept out the program because it provides services that Medicaid doesn't pay for.

"If you think about it, every provider out there provides services that Medicaid doesn't pay for," she says, adding that the only question really should be whether the provider is capable of providing the service that Medicaid wants to buy.

"The freedom of choice policy is particularly great in the case of family planning, as evidenced by years of Congressional amendments clarifying a right of access," says Ms. Rosenbaum. "There is no service that is more emblematic of this than family planning."

Each time that Medicaid has been amended to allow tighter control over access, Congress has exempted family planning, notes Ms. Rosenbaum.

"I believe what the state has done here is unlawful, but that does not mean the state shouldn't have its say in court before losing its federal funding over it," she says.

Ms. Rosenbaum says that she feels equally strongly, however, that beneficiaries should have access to the same protection to stop a service from being withheld from them, until there has been a definitive ruling.

"The question is, is it legal? We don't know the answer to that yet," says Ms. Rosenbaum. "The state has the right to have its case heard before we know whether it's legal or not, but beneficiaries should have the same right."

Contact Ms. Gold at (202) 296-4012 or and Ms. Rosenbaum at (202) 994-4232 or