Vikki Wachino's letter to state Medicaid agencies in all 50 states strongly reminded them that they cannot cut funding to medical providers just because they might also provide abortion services.
Wachino, director of the CMS, said the "free choice of provider" provision in federal Medicaid law bars such actions.
"Providing the full range of women's health services neither disqualifies a provider from participating in the Medicaid program, nor is the provision of such services inconsistent with the best interests of the beneficiary, and shall not be grounds for a state's action against a provider in the Medicaid program," she wrote.
Planned Parenthood Arizona says Arizona is among at least 24 states that have tried to cut off funding for legal services in the past year. A 2012 Arizona law barring any non-abortion Medicaid funding for abortion providers was blocked by federal courts because it violated the "free choice of provider" provision.
The letter comes as the Arizona Senate is poised to vote to require the state's Medicaid plan to exclude abortion providers if they don't fully segregate money they get for covered services. House Bill 2599 also requires funding cutoffs and license revocations for providers that violate medical waste rules or submit a claim for abortion-related procedures.
Rep. Justin Olson, R-Mesa, is sponsoring the legislation. He said his House Bill 2599 only provides an enforcement mechanism if a provider breaks current law banning state or federal funding of abortions.
"What's important for CMS to acknowledge is that it is already the law that abortion providers do not use taxpayer dollars to finance or fund an abortion," Olson said.
Planned Parenthood Arizona has said it meticulously separates its billings so that no taxpayer money pays for non-covered abortions. But the group is concerned Olson's proposal requiring abortion providers to allocate their overhead costs seems to be a setup.
"What we're concerned about is it this really a gotcha game, where the state uses this provision as a pretext to try and chase down every penny," spokeswoman Jodi Liggett said last month. "And if you absolutely cannot without a shadow of a doubt prove a negative, that will be an excuse to kick us out of the Medicaid program."
Bryan Howard, president of the Planned Parenthood Arizona, said in a statement Tuesday that "this bill is just an attempt to re-litigate what has already been decided and waste taxpayer dollars while doing so."
But Josh Kredit, general counsel for the anti-abortion group Center for Arizona Policy, disputed that. Kredit's group writes much of the legislation targeting abortion that moves through the Republican-controlled legislature.
"The letter by CMS doesn't change anything in that the Taxpayer Protection and Medicaid Integrity Act can still be good law," Kredit said.