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PHOENIX, AZ, August 23, 2013 (LifeSiteNews.com) – A federal appeals court has blocked enforcement of an Arizona law that would have prevented abortion providers from receiving state Medicaid funds.

The law, passed in 2012, would have barred Medicaid funds from being used to pay for any medical procedures performed at abortion centers, even those unrelated to abortion.

It is already illegal in Arizona for state or federal tax money to be spent directly on abortion, but supporters of the new law argue that reimbursing abortionists, even for their other business expenses, amounts to indirectly subsidizing abortion.

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Planned Parenthood sued to overturn the law, arguing that it would interfere with Medicaid recipients’ legal rights to choose any “qualified” provider of medical care. Because the federal government counts Planned Parenthood among its authorized providers, a lower ruled in October that the state must continue paying the organization.

On Thursday, the Ninth Circuit Court of Appeals upheld the ruling, marking another setback in Arizona’s ongoing efforts to defund Planned Parenthood and other abortion providers.

“It’s disappointing that Arizonans are going to continue to have to subsidize the abortion industry and Planned Parenthood,” Center for Arizona Policy spokesman Aaron Baer said in a statement. “Arizona is a pro-life state. This was a measure that the people of Arizona wanted. We shouldn’t be forced to give taxpayer money to any organization that performs abortions.”

Planned Parenthood says it sees about 3,000 Medicaid patients a year in Arizona. The organization estimates it receives roughly $350,000 in yearly compensation from the government.

Planned Parenthood recently settled a $4.3 million Medicaid fraud case in neighboring Texas and is under investigation by the GAO for its business practices nationwide.

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In order to stop those payments, pro-life leaders in the state must now decide whether to appeal the Ninth Circuit’s decision to the Supreme Court, or try to pass a new bill next year with language the court might find more agreeable.

In May, the Supreme Court refused to hear an appeal from the state of Indiana over a similar law passed in 2011, which was also struck down by a federal court. Indiana eventually gave up its defense of the law.

Alliance Defending Freedom attorney Steven Aden, who helped Attorney General Tom Horne defend Arizona’s law in court, told the Arizona Republic he and Horne are “evaluating appropriate next steps.”