The law, signed May 10 by Gov. Mitch Daniels, violates Medicaid rules that let people choose their medical providers, Donald Berwick, administrator of the department's Centers for Medicare and Medicaid Services, said in a letter to Indiana officials. As such, the law could cost the state millions and possibly even billions of dollars, his letter to state officials said.
Indiana relies on about $4 million in federal Medicaid family-planning funds and more than $4 billion in total Medicaid dollars.
"Medicaid programs may not exclude qualified healthcare providers from providing services that are funded under the program because of a provider's scope of practice," said Berwick, whose agency, previously known as the Health Care Financing Administration, works in partnership with state governments to administer Medicaid, the U.S. health program for people and families with low incomes and resources.
A spokesman for Indiana's Family and Social Services Administration, Marcus Barlow, told National Journal the state will not comply with the federal order to fund Planned Parenthood and other clinics that offer abortion services.
"The way the law was written, it went into effect the moment the governor signed it," Barlow said. "We were just advised by our lawyers that we should continue to enforce Indiana law."
However, Berwick told National Journal, "We fully expect Indiana to comply with the law."
State Rep. Eric Turner, the Cicero Republican who proposed the law, said the letter was "another example of the federal government trying to tell states what to do," The Indianapolis Star reported.
"I think states are very capable of deciding their own fate and running their own ship," he said.
U.S. Rep. Marlin Stutzman, R-Ind., agreed, saying the administration shouldn't tell a state "it cannot administer its own programs."
"Health and Human Services should respect the will of Hoosiers who simply ask that their tax dollars do not subsidize an entity that maintains an abortion clinic," USA Today quoted Stutzman as saying.
Planned Parenthood Federation of America President Cecile Richards said the administration sent "a clear message that states cannot play politics with women's health and prevent Medicaid patients from choosing their preferred healthcare providers."