WASHINGTON, D.C., June 17, 2011 ( – President Obama’s Justice Department is joining Planned Parenthood in a federal lawsuit to stop a law that bars taxpayer dollars from funding health centers for low-income women that also perform abortions.

Indiana is the first U.S. State to cut off Medicaid dollars from Planned Parenthood. Although Planned Parenthood operates family planning clinics that do not provide abortions, state officials said Medicaid dollars end up subsidizing the organization’s abortion franchise, by propping up their bottom line.

The loss of Medicaid dollars, however, prompted Planned Parenthood to file a lawsuit against Indiana, claiming that the law is “an assault on women” that would deprive them of health care options.

Planned Parenthood stands to lose $3 million thanks to the law, which is already in effect.

The Associated Press reports that the Justice Department filed a brief on Thursday with U.S. District Judge Tanya Walton Pratt, arguing that she should side with Planned Parenthood and enjoin the law, because it prevents women on Medicaid from choosing their own provider of health services.

Ken Falk, an attorney representing Planned Parenthood, said he did not expect the federal government would actively intervene in the case on their side. “I had no idea this was coming,” he told the AP.

But Indiana officials dispute the notion that women would face any loss of health services because of the disqualification of abortion providers like Planned Parenthood.

When Gov. Mitch Daniels signed the bill into law, he noted, “family planning or basic women’s health, will remain readily available in every one of our 92 counties.”

He also noted that affected organizations, such as Planned Parenthood, could start receiving Medicaid dollars again “by ceasing or separating its operations that perform abortions.”

Marjorie Dannenfelser, president of the Susan B. Anthony List, told the New York Times in a letter to the editor that Indiana state data showed women have far more options than Planned Parenthood: in the 21 affected counties she pointed to 800 other providers that could provide Medicaid services sought by low-income female patients.

Dannenfelser criticized Obama’s Health Department for threatening to cut off all federal Medicaid funding in order to save Planned Parenthood. Donald Berwick, Administrator of the Centers for Medicare & Medicaid Services (CMS) in the federal Department of Health and Human Services (HHS), has denied Indiana’s changes to the Medicaid program, putting $5.3 billion in Medicaid money for the state program in jeopardy.

“By proposing to cut off all of Indiana’s Medicaid funding, it is the Obama administration that is acting dangerously by jeopardizing the health care of women,” she countered.

Indiana has 60 days from June 1 to appeal Berwick’s decision. Judge Pratt says she will make a decision about the law’s constitutionality by July 1.