INDIANAPOLIS -- Federal officials said Monday they're taking a hard look at a new Indiana law that withholds some public funding for Planned Parenthood of Indiana, a development that could cost the state some of its Medicaid funding.

The U.S. Centers for Medicaid and Medicare Services issued a statement saying it was reviewing Indiana's law and situations in other states threatening to withhold funds from abortion providers.

"Federal law prohibits federal Medicaid dollars from being spent on abortion services. Medicaid does not allow states to stop beneficiaries from getting care they need - like cancer screenings and preventive care - because their provider offers certain other services," the agency said. "We are reviewing this particular situation and situations in other states."

The statement, given to The Associated Press on Monday, was first reported by The New York Times.

The review appeared to pose the latest challenge to the contentious law signed by Gov. Mitch Daniels on May 10. The law makes Indiana the first state to deny Medicaid funds for general health services such as breast exams and Pap smears and affects more than $1 million in Medicaid funding for Planned Parenthood.

Planned Parenthood of Indiana President Betty Cockrum welcomed the federal review, saying Monday that it might provide a second avenue of relief if a federal judge decides not to grant the organization's request to block the law. Planned Parenthood argues in a federal lawsuit that statute is unconstitutional.

Cockrum also noted that the secretary of the Indiana Family and Social Services Administration, which oversees Medicaid in Indiana, said last month that the law could threaten $4 million in federal funds that help various family-planning groups in Indiana.

Indiana Attorney General Greg Zoeller issued a statement Monday saying his office would "continue to diligently represent" the state against Planned Parenthood's lawsuit. A hearing is set for June 6 before U.S. District Judge Tanya Walton Pratt, who has said she would rule by July 1.

"The State's position is that Planned Parenthood could set up separate corporate entities to provide abortions and Medicaid-eligible family planning services such that tax dollars do not wind up subsidizing abortions indirectly," Zoeller said.

Cockrum has said establishing separate entities would be "logistically challenging" and there was no guarantee that future Legislatures would not try to shut them down, too.

The state's non-partisan Legislative Services Agency also raised questions about the law. In a recent analysis, it noted that the Indiana Family and Social Services Administration said federal law requires state Medicaid plans "to provide any eligible individual medical assistance and that they can obtain such assistance from any institution, agency, community pharmacy, or person, qualified to perform the service(s) required."

Cockrum said at least six other states also were considering restrictions on abortion providers.

It wasn't clear Monday to which "situations in other states" the CMS statement was referring. But last week, Kansas Gov. Sam Brownback signed a law that will require annual, unannounced inspections and impose new health and safety rules on abortion clinics, and prevent such clinics from using telemedicine systems to dispense pregnancy-terminating drugs.

In Texas, a plan to overhaul Medicaid funding and disbursements would strip state funding to all hospitals and clinics that perform abortions or "abortion-related services." The proposal has cleared that state House and is pending in the Senate. States pay a share of Medicaid services.

Missouri and Texas already block Planned Parenthood from receiving Medicaid block grants for family planning, said Indiana Solicitor General Thomas Fisher, who is representing the state against the organization's lawsuit.

Indiana lawmakers wanted to cut all public funding to Planned Parenthood, but about $1.5 million in Medicaid family planning block grants flows to Planned Parenthood through a separate organization, and the new law does not affect those funds. The total amount of Medicaid funding the law would strip from Planned Parenthood for general health care services is about $1.4 million.

Planned Parenthood said it will continue serving 9,300 Medicaid patients at its 28 health centers across Indiana through at least May 30 after receiving more than $50,000 in recent donations from across the country and overseas.

Sue Swayze, legislative director for Indiana Right to Life, said she interpreted the CMS statement to mean the federal agency did not want any beneficiaries to lose health care services.

"The law is clear -- and case law may be clear -- that Indiana has the right to choose the vendors that they want," Swayze said.