The Senate voted 35-13 Tuesday to approve House Bill 1210, which also shortens the window in which women can obtain abortions, the Indianapolis Star reported.
"The taxpayers will no longer fund an organization that provides abortion as part of their services that they give to the public," measure co-sponsor Sen. Michael Young, R-Indianapolis, said.
No other state has ended Medicaid funding to Planned Parenthood, although the Kansas legislature is considering a similar measure.
A federal measure to pull funding from Planned Parenthood, being pushed at the national level by U.S. Rep. Mike Pence, R-Ind., recently died in the U.S. Senate.
Planned Parenthood of Indiana says losing its $3 million in government funding would put at risk the services it provides to 22,000 low-income Indiana residents, including birth control pills, cancer screenings and sexually transmitted disease tests.
"It makes absolutely no sense to reduce access to birth control when the objective is to reduce the incidence of abortion," Planned Parenthood of Indiana president Betty Cockrum said.