In 2011, Indiana enacted a law (commonly referred to as HEA 1210) barring state agencies from contracting with or making grants to entities that perform abortions or maintain facilities where abortions are performed. As applied, the law would have disqualified Planned Parenthood of Indiana—a long-time Medicaid provider of non-abortion services such as cancer screenings, contraception, and STD testing—from receiving Medicaid reimbursement for those covered services solely because it also performed abortions (services for which it did not seek Medicaid funds). Planned Parenthood and certain patients sued state officials, alleging that the law conflicted with the federal Medicaid Act's free-choice-of-provider provision, 42 U.S.C. § 1396a(a)(23)(A), which guarantees Medicaid beneficiaries the right to obtain covered care from any qualified and willing provider. The federal Centers for Medicare & Medicaid Services (CMS) informed Indiana that excluding providers for reasons unrelated to professional qualification would violate the Act and disapproved a related state plan amendment. The district court granted a preliminary injunction preventing enforcement of the exclusion as to Medicaid; the state appealed.
Does the Medicaid Act's free-choice-of-provider provision preempt an Indiana statute that disqualifies a provider from participating in Medicaid solely because the provider also performs abortions, a reason unrelated to the provider's professional qualifications to furnish Medicaid-covered services?
Under the Medicaid Act's free-choice-of-provider provision, 42 U.S.C. § 1396a(a)(23)(A), a state plan must allow beneficiaries to obtain covered services from any institution, agency, or person qualified to perform the needed services who undertakes to provide them. States may set and enforce reasonable standards relating to provider qualifications and may exclude providers for cause, including for fraud or quality-of-care concerns, see 42 U.S.C. § 1396a(p)(1), but they may not restrict beneficiary choice for reasons unrelated to the provider's professional qualifications to furnish covered services. State laws that conflict with or stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in the Medicaid Act are preempted under the Supremacy Clause.
Affirming the preliminary injunction, the Seventh Circuit held that Indiana's exclusion of Planned Parenthood from Medicaid participation because it performs abortions is likely preempted by the Medicaid Act's free-choice-of-provider provision. The court concluded that "qualified" refers to a provider's ability and legal authorization to perform the covered services, and that excluding a provider for performing abortions (a non-Medicaid service) is unrelated to those qualifications and unlawfully restricts beneficiary choice.
1) Text and structure: The court focused on the statutory text guaranteeing beneficiaries the right to choose among "qualified" providers. It construed "qualified" to mean professionally and legally capable of performing the covered service safely and competently. Indiana's categorical exclusion did not turn on competence, licensure, or willingness to comply with program rules; it turned on the provider's engagement in a separate, lawful medical service that Medicaid does not fund. That reason, the court explained, is not about "qualification" within the meaning of § 1396a(a)(23)(A). 2) Federal standards and exclusions: Congress expressly authorized states to exclude providers "for cause," such as fraud, abuse, or quality deficiencies, 42 U.S.C. § 1396a(p)(1), and federal regulations codify a broad beneficiary choice presumption subject to limited qualifications standards. Indiana's rationale—penalizing participation in abortions—did not fit the statute's cause-based exclusions and would allow states to erode beneficiary choice for ideological or political reasons unrelated to medical competence. 3) Conflict preemption and federal oversight: CMS signaled that Indiana's exclusion violated federal law and disapproved a state plan amendment that attempted to implement it, underscoring the federal objective of preserving beneficiary choice among qualified providers. Because Indiana accepted federal Medicaid funds subject to Congress's conditions, it could not enforce a contrary state limitation. The court therefore found a strong likelihood of success on the merits of the preemption claim. 4) Preliminary injunction factors: The plaintiffs showed irreparable harm because the exclusion would immediately sever Medicaid patients' access to their chosen provider for essential, time-sensitive care, and such harms are not compensable by money damages. The balance of equities and public interest favored an injunction that maintained the federal statutory status quo while the litigation proceeded, avoiding disruption to low-income beneficiaries' care networks. 5) Constitutional avoidance: The court emphasized that this was not an abortion-rights ruling under the Due Process Clause; it was a statutory preemption decision under the Spending Clause framework. Indiana remains free to decline to fund abortions (a restriction already embedded in federal law), but it may not leverage Medicaid participation to bar qualified providers from furnishing unrelated, covered services.
The decision is a cornerstone in the line of "defunding" cases interpreting Medicaid's free-choice-of-provider provision. It teaches several doctrinal lessons: (a) federal conditions on spending programs are enforceable limits on state policy when states accept federal funds; (b) the meaning of "qualified" in § 1396a(a)(23)(A) is tethered to professional competence and legal authorization, not to a provider's engagement in unrelated, lawful medical services; and (c) conflict preemption can supply the basis for preliminary injunctive relief to preserve federal program uniformity and beneficiary rights. For law students, the case is frequently paired with later circuit decisions reaching similar conclusions and is often contrasted with Supreme Court decisions narrowing other types of Spending Clause enforcement, highlighting the contours of preemption and the distinction between statutory and constitutional abortion jurisprudence.
Planned Parenthood of Indiana underscores that states participating in Medicaid must honor Congress's beneficiary-centered design: qualified, willing providers remain accessible to patients regardless of a state's disagreement with services the provider offers outside the Medicaid program. The Seventh Circuit's insistence that "qualified" refer to professional competence and legal authorization, not unrelated policy preferences, preserves uniformity and protects the practical ability of low-income patients to obtain essential care.