updated 6/24/2011 8:51:52 PM ET 2011-06-25T00:51:52

The state of Indiana is not allowed to cut off most of Planned Parenthood's state and federal public funding solely because the organization also provides abortions, a federal judge said Friday in blocking part of the state's tough new abortion law.

U.S. District Judge Tanya Walton Pratt granted Planned Parenthood of Indiana's request for preliminary injunction on the state's move to defund the organization. Her ruling sides with federal officials who said states cannot disqualify Medicaid providers merely because they also offer abortions or restrict Medicaid recipients' freedom to choose their health care provider.

Indiana attorney general's office spokesman Bryan Corbin said the state likely will appeal.

The law that went into effect last month made Indiana the first state to deny Medicaid funds to Planned Parenthood for general health services such as breast exams and Pap tests. It cut off about $1.4 million to Planned Parenthood, which serves about 9,300 clients in Indiana who are on the state-federal health insurance plan for low-income and disabled people who receive Medicaid.

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The state had argued federal law forbids Medicaid to cover abortions in most circumstances and that the program indirectly funds the procedures because Planned Parenthood's financial statements show it commingles Medicaid funds with other revenues. The state has said the state-federal health insurance plan for low-income and disabled people might subsidize some of the overhead costs for space where abortions are performed.

Pratt's ruling said the state's new law would cause "dire financial effects" for Planned Parenthood and that plaintiffs in the case wouldn't be able to get certain medical services from their Medicaid providers of choice because of the defunding.

Planned Parenthood of Indiana has been without Medicaid funding since Gov. Mitch Daniels signed the law May 10 and was forced to stop seeing Medicaid patients this week after private donations that had paid those patients' bills ran out.

"We are extremely happy that Planned Parenthood will be able to continue to provide these necessary medical services that benefit thousands of Hoosiers," Planned Parenthood's attorney, Ken Falk of the American Civil Liberties Union, said after the ruling Friday.

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Marcus Barlow, a spokesman for the state's Family and Social Services Administration, said while the injunction is in effect, Planned Parenthood will be able to provide services and then apply for Medicaid reimbursement as it did previously. He said the agency was unsure if it would push for an appeal of the decision or whether Planned Parenthood would continue to get funding during any appeal period.

"We're still deciding on what our next step will be," Barlow said.

Kansas clinic denied permit
In Kansas, meanwhile, a clinic has been denied a state license that would allow it to continue performing abortions and will probably close, the clinic's attorney said.

Kansas enacted a law earlier this year establishing a special licensing process for abortion providers, and the state's three abortion clinics must either get licenses or stop offering the procedure on July 1.

An attorney for the Aid for Women clinic said it received a notice that its application for a license had been denied by the Kansas Department of Health and Environment without an inspection, and she was looking at its legal options. But Cheryl Pilate also said the clinic would have to close, at least temporarily.

The clinic received its notice on the same day the leader of a Planned Parenthood chapter said his clinic should receive a license based on a two-day review in which inspectors found it will comply with all new regulations. An inspection of the third clinic is scheduled for Wednesday. All three clinics are in the Kansas City area.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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