The move follows an announcement last week by Health and Human Services Secretary Kathleen Sebelius that the federal government would withdraw funding for Texas' "Women's Health Program" after state lawmakers last year enacted the abortion funding prohibition.

"Because the state is implementing a restriction in the freedom of choice of providers in their Women's Health Program that is not permitted under federal law, we have no choice but to not renew their program," said Cindy Mann, the director of the Centers for Medicare and Medicaid Services, a federal agency that administers the government-run healthcare programs for the elderly and poor.

"We both agree that this has been a very valuable program for women in Texas, and we very much regret taking this step," Mann said.

Texas is the first state to have its Medicaid Family Planning Demonstration Program canceled by the federal government. The program provides basic medical services, including breast and cervical cancer screening, and birth control, for 130,000 of the state's poorest women,

The conflict began when the Texas Legislature inserted a 'poison pill' into the Medicaid funding bill passed in 2011, which mandates that no funding under the program go to any facility that provides abortion services, even if no state money directly paid for abortions.

If the federal government did not agree to the waiver, the language requires that the program be discontinued.

Mann said that was unacceptable.

"The language would restrict women's ability to choose which provider they see for critical services, because that provider offers other services which are not part of the program, nor even paid for by the program," Mann said.

Texas Governor Rick Perry, a Republican, decried the move.

"It is the height of political posturing for the Obama Administration to put the interests of abortion providers and their affiliates, like Planned Parenthood, over the well-being of more than 100,000 low-income Texas women," Perry said in a statement Thursday.

"I will not stand by and let this administration abandon these Texas women to advance its political agenda," Perry said. "Texas will fund these services with or without the federal government."

The federal government pays about 90 percent of the cost of the program.

Mann said the administration will begin a two-stage process of winding down federal participation in the Texas program over nine months, to "minimize any disruption in coverage for women enrolled in the program."

(Reporting By Jim Forsyth; Editing by Dan Burns and Paul Simao)

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