Planned Parenthood must face trial over Texas Medicaid fraud claims

By Brendan Pierson and Nate Raymond

(Reuters) -Planned Parenthood must face a trial in a $1.8 billion lawsuit by Texas accusing the organization of defrauding the Republican-led state's Medicaid health insurance program, a federal judge ruled on Monday.

At issue is billing by Planned Parenthood after Texas announced its decision to terminate the organization as a provider under its Medicaid insurance programs for low-income people.

Planned Parenthood, which provides abortions and a variety of other healthcare services, and Texas both had asked U.S. District Judge Matthew Kacsmaryk, in Amarillo, to rule in their respective favor rather than having the case go to trial. But Kacsmaryk declined to do so, and scheduled a trial to begin next April.

In an order that is now sealed but was briefly posted on the public court docket, the judge ruled against Planned Parenthood on a key legal issue, finding that it was obligated to return some funds to Texas and to Louisiana, which is not taking part in the case. However, he did not rule on exactly how much it must return, or whether Planned Parenthood knowingly broke the law.

Whether Planned Parenthood is found to have knowingly committed fraud will be key to the outcome. The lawsuit accuses the organization of overbilling by about $17 million, but the legal penalties for fraud are potentially many times that.

Planned Parenthood general counsel Susan Manning in a statement called the case "baseless."

"We will never back down, and we look forward to winning this case at trial," she said.

The office of Texas Attorney General Ken Paxton did not immediately respond to a request for comment.

The lawsuit against Planned Parenthood was brought in 2021 by an anonymous plaintiff under the federal False Claims Act, which lets individuals bring whistleblower lawsuits on behalf of governments and collect a reward if successful. The lawsuit was later joined by Paxton.

They accuse Planned Parenthood of unlawfully continuing to bill the state after Texas announced its decision - blocked for years in legal challenges - to kick the organization off the Medicaid insurance program for low-income people.

State and federal funds are barred from being used to pay for abortions, but Planned Parenthood is reimbursed by most states for other reproductive healthcare services it provides.

Kacsmaryk, a conservative jurist who was an anti-abortion activist before being appointed to the bench by Republican then-President Donald Trump, is the judge who in April issued an order effectively banning the abortion pill mifepristone. That order has been put on hold until the U.S. Supreme Court has a chance to weigh in.

The anonymous plaintiff who brought the lawsuit has identified himself as the person who in 2015 released undercover video footage purporting to show Planned Parenthood staff discussing the sale of fetal tissue. Planned Parenthood has said the videos were heavily edited and misleading, and denied wrongdoing.

Those videos led Texas, as well as Louisiana, to announce later in 2015 that they would terminate Planned Parenthood as a provider covered by their Medicaid programs, but federal court orders stopped them from finalizing the terminations for years. The orders were later lifted on appeal, allowing Texas to end its contract with Planned Parenthood in 2021 and Louisiana in 2022.

The lawsuit before Kacsmaryk accuses Planned Parenthood of defrauding the states by continuing to bill and collect payments from their Medicaid programs after the initial termination decisions, and failing to repay what it received after the terminations were finally allowed to take effect. Texas joined in the case, while Louisiana did not.

Planned Parenthood has said that its total liability in the case, including legal penalties, could amount to $1.8 billion, and threaten its ability to operate in Texas.

Planned Parenthood has said there was nothing illegal about billing the states while their termination decisions were paused by court orders and that it cannot be held liable because the states never asked for the money to be repaid. Kacsmaryk, however, ruled on Monday that once appeals courts allowed the terminations to become final, Planned Parenthood was obligated to return the money it had received in the meantime.

Planned Parenthood, as a leading abortion provider, has long drawn the ire of abortion opponents, who have called for cutting off its government funding.

Kacsmaryk automatically hears all federal cases filed in Amarillo, which has made the court a popular venue for litigation brought by conservative activists.

Texas has banned nearly all abortions in the wake of the Supreme Court's 2022 decision overturning the landmark 1973 Roe v. Wade ruling that had legalized abortion nationwide.

(Reporting by Brendan Pierson in New York; Editing by Will Dunham, Alexia Garamfalvi, Leslie Adler and Jonathan Oatis)