699 F.3d 962 (7th Cir. 2012)
Planned Parenthood of Indiana, Inc. v.
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.
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.