Great site to get some questions in regards to surrogacy, answered!
Yes, it is illegal to use ones state or federal medical to cover a surrogacy. When one does this, think of all the other laws one breaks to legitimize the child born in surrogacy situation.
http://infertilityanswers.typepad.com/surrogacy_101/2016/11/mistake-number-twelve-of-the-14-mistakes-not-to-make-as-a-surrogate-or-gestationa-carrier-thinking-t.html
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