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Indiana's Planned Parenthood law faces federal test

WASHINGTON, DC - JANUARY 24: Tens of thousands of anti-abortion demonstrators attend a rally ahead of the March for Life on the National Mall January 24, 2011 in Washington, DC. The annual march marks the anniversary of the landmark Roe v. Wade decision by the the Supreme Court that made abortion legal in the United States. (Photo by Chip Somodevilla/Getty Images) Chip Somodevilla/Getty Images

Officials in the Obama administration say Indiana's new law, which strips Medicaid funding for health care providers that provide abortions -- like Planned Parenthood -- breaches federal rules, the New York Times reports. The administration has 90 days to decide whether to approve the law, but officials have "made it clear they will not approve the changes," according to the report -- and they may act sooner to curb similar laws from passing in other states.

Republican lawmakers in virtually every state this year have pushed legislation to restrict abortion rights, as have Republicans at the federal level, but the new Indiana law represents the boldest state-based challenge to Planned Parenthood yet.

The law, which took effect May 10, bars state agencies from entering contracts or making grants with entities (besides hospitals) that perform abortions. It also breaks any such existing contracts. That means that Planned Parenthood facilities in the state lose $2 million in federal funding funneled through the state, including about $1.3 million from Medicaid funds allocated for family planning.

However, the new law is subject to federal review, since Medicaid is financed by both the federal and state governments. Federal law say states cannot pick and choose which health providers receive Medicaid funds. Before Indiana lawmakers passed the law, the Indiana Family and Social Services Administration warned that the state risked losing all of its $4 million in Medicaid family-planning funds by breaching Medicaid rules.

No other state has attempted to ban the use of Medicaid funds at Planned Parenthood.

The new law pits the Obama administration against Indiana's Republican lawmakers, led by Gov. Mitch Daniels. Daniels caused some controversy within the Republican party in 2010 when he called for a "truce" on social issues, and his decision to sign this law was seen as a possible indicator that the governor was interested in winning back the support of social conservatives for a presidential bid. Over the weekend, however, Daniels said he won't be running for president.

Meanwhile, Planned Parenthood has challenged the constitutionality of the law and that case is pending, but the organization failed to get a federal court to keep the law from going into effect.

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