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Analysis of Indiana Court Ruling on Planned Parenthood Funding

Late on Friday, June 24, 2011, District Court Judge Tanya Walton Pratt issued a preliminary injunction against a part of Indiana’s law, HEA 1210, that prohibits Indiana agencies from contracting with or making grants to abortion clinics.  Though the decision means the law is currently suspended, the case — initiated by Planned Parenthood of Indiana (PPIN) — is likely to be appealed.

Planned Parenthood’s claim that the Indiana law “is violative of [Medicaid’s] freedom of choice requirements,” should fail upon appeal because Indiana’s law, HEA 1210, respects the right of Medicaid patients to freely choose among qualified Medicaid providers.  Federal law establishes that the State of Indiana has the authority to exclude from participating in Medicaid healthcare providers that the State determines are not qualified.[1] Indiana is within its rights to determine that abortion providers are not “qualified” to participate in its Medicaid program, based on its reasoned judgment that the exclusion is necessary to prevent subsidizing the abortion industry with taxpayer funds.

The Medicaid Act does not require that Indiana deem every willing or desired provider as “qualified” to participate in its Medicaid program. Rather, the Medicaid Act’s requirement that its recipients have a “free choice of providers” only extends to those providers a State has determined are qualified.  Though PPIN asserted it “remains qualified to perform Medicaid-reimbursable services,” under Indiana law, PPIN is no longer a qualified Medicaid provider. And the Supreme Court has already determined that the Medicaid Act “does not confer a right on a recipient to continue to receive benefits for care [from a provider] that has been decertified.”[2]

Though Judge Walton Pratt held some level of deference should be afforded to a recent determination by the Obama Administration that Indiana’s law violated Medicaid’s “free choice of provider” provision, she purported that her analysis would remain the same in the absence of the letter.  “Thus even stripping HHS’ decision from the equation, PPIN would still likely have a reasonable chance of prevailing…”

However, both the Obama Administration and Judge Walton Pratt ignore or misunderstand Indiana’s statutory right to exclude individuals and entities from participating in Medicaid. And such a narrow interpretation of Medicaid’s exclusion provision seems precisely what Congress intended to guard against.

When § 1396a(p)(1) was added to the Medicaid statute in 1987, Congress did not make this exclusion provision subject to the already-existing free choice of provider provision.  And the legislative history behind the exclusion provision of the Medicaid law is clear that States have the power to exclude providers for any bases under its State laws: “This provision is not intended to preclude a State from establishing, under State law, any other bases for excluding individuals or entities from its Medicaid program.”[3] As the First Circuit has held, the language of Medicaid’s exclusion provision (that by “any other authority” a State may exclude providers) “was intended to permit a state to exclude an entity from its Medicaid program for any reason established by [S]tate law.”[4]

Judge Walton Pratt’s opinion also gives short shrift to the State’s reasoned judgment for enacting the funding prohibition of HEA 1210.

In response to the State’s reasoned judgment that HEA 1210 seeks to prevent indirect subsidization of the abortion industry, Judge Walton Pratt asserts that the State “ignores the fact that PPIN complies with all state and federal requirements to ensure that taxpayer dollars are not used for abortion services.” However, the Judge ignores the fact that Indiana has a new state requirement that PPIN is outright refusing to comply with (and is the basis of the lawsuit before her).

Restrictions on direct and indirect funding of abortion have been upheld by the courts.  And the United States Supreme Court has made clear that it is permissible for a State to engage in unequal subsidization of abortion and other medical services to encourage alternative activity deemed in the public interest.[5]

Judge Walton Pratt notes that HEA 1210 “will exact a devastating financial toll on PPIN.”  However, HEA 1210 is not an absolute bar on PPIN’s participation in Medicaid. The “tangible” effects on PPIN recited by the judge are the result of PPIN’s own choices.

The Indiana State Department of Health has explained that HEA 1210 permits some level of affiliation between Medicaid providers and abortion clinics, allowing PPIN to still receive federal funding “if it establishes independent, unsubsidized affiliates to perform abortions.”[6]

Instead, PPIN has chosen to initiate a lawsuit, lay off employees, stop taking new patients, and demand taxpayer dollars despite the democratic process’ determination that true separation of its abortion business is necessary to ensure that taxpayers are not involuntarily subsidizing it.

Furthermore, Indiana’s determination that abortion providers are not qualified to participate in its Medicaid program does not change Medicaid’s family planning benefits.  In the 21 counties estimated by the Indiana Family and Social Services Administration (FSSA) to be impacted by HEA 1210’s requirement, there still exist approximately 800 qualified provider locations where Medicaid patients may receive family planning services.

Thus, PPIN’s decision not to comply with Indiana’s law does not deprive Medicaid patients of “choice” under the meaning of the Medicaid statute.

Unfortunately, the Obama Administration’s having “threatened” the loss of funds to the Medicaid patients of Indiana, was another factor that Judge Walton Pratt found “tilts in favor of granting an injunction.” And, for now, Indiana’s funding prohibition is on hold. 

[1] 42 U.S.C. § 1396a(p)(1).

[2] O’Bannon v. Town Court Nursing Ctr., 447 U.S. 773, 785 (1980).

[3] S. Rep. No. 100-109, at 20 (1987).

[4] First Medical Health Plan v. Vega-Ramos, 479 F.3d 46, 53 (1st Cir. 2007) (emphasis in original).

[5] Rust v. Sullivan, 500 U.S. 173, 201 (1991).

[6] Def’s Mem. In Opp’n to the Mot. for Prelim. Inj. at 23.