Medicaid Coverage for Transgender Women Seeking Gender-Affirming Surgery

Facts of the Case

Ms. Good and Ms. Beal had presented as female for many years. They had changed their names, birth certificates, driver's licenses, and social security cards. Both women experienced anxiety and depression as a result of their gender dysphoria and had health care providers who deemed that surgery was medically necessary to treat their gender dysphoria. They sought Medicaid coverage for surgical interventions through their MCOs; Ms. Good sought a gender-affirming orchiectomy procedure from AmeriHealth Caritas Iowa in January 2017, and in June 2017 Ms. Beal sought gender-affirming vaginoplasty, penectomy, bilateral orchiectomy, clitoroplasty, urethroplasty, labiaplasty, and perineoplasty from Amerigroup of Iowa, Inc.

Iowa Admin. Code r. 441–78.1 (4) (2014) stipulates that coverage of “cosmetic, reconstructive, or plastic surgery” is prohibited because these procedures are aimed to improve appearance and help people feel better from a psychological perspective, rather than improve bodily functions. Gender-affirming surgeries are excluded from coverage under this rule because they do not restore bodily function. Iowa code includes language that specifically prohibits “[p]rocedures related to transsexualism, hermaphroditism, gender identity disorders, or body dysmorphic disorders … [b]reast augmentation mammoplasty, surgical insertion of prosthetic testicles, penile implant procedures, and surgeries for the purpose of sex reassignment” (IAC Ch 78, p 3 (2014), available at: https://www.legis.iowa.gov/docs/iac/rule/02-05-2014.441.78.1.pdf).

Ms. Good filed her request for Medicaid preapproval on January 27, 2017, but Medicaid denied her request given the rule that excluded “sex reassignment” surgery as a covered benefit. She filed an internal appeal and later an appeal to the Department of Human Services (DHS), both of which were denied, upholding AmeriHealth's denial of coverage. Ms. Good then appealed to the director of DHS, but the denials were upheld and it was determined that DHS lacked jurisdiction to review Ms. Good's constitutional challenge to the rule. She filed a petition for judicial review in the district court on September 21, 2017 claiming that Iowa Admin. Code r. 441–78.1 (4) is in violation of the Iowa Civil Rights Act (ICRA) (Iowa Code § 216.7(1)(a) (2009)) and the equal protection clause of the Iowa Constitution, which prohibit sex and gender discrimination. Ms. Beal had a similar process with Amerigroup and filed a petition for judicial review in district court on December 15, 2017. She presented the same arguments.

DHS filed to dismiss both cases on various grounds. The district court consolidated the cases and denied the DHS motions to dismiss, finding that DHS's denial of Medicaid coverage was reversible and would disproportionately negatively impact private rights, and that the decision to deny coverage for gender-affirming surgery was “unreasonable, arbitrary, and capricious.” The Iowa Supreme Court retained and reviewed the appeal by DHS.

Ruling and Reasoning

The Iowa Supreme Court affirmed the district court ruling. DHS had challenged the ruling on several grounds, which the Iowa Supreme Court considered. It ruled that Medicaid is a government unit under the ICRA's definition of a public accommodation and that denying coverage of the sought-after surgical procedures violated ICRA's prohibition against gender identity discrimination, that the denial of coverage violated equal protection rights embedded within the Iowa Constitution, and that the rule allowing the denial would negatively impact private rights disproportionately. While the district court ruled that the ICRA was not violated, because the gender discrimination clause does not include “transsexuals,” the Iowa Supreme Court noted that the rule violated the ICRA prohibition against gender discrimination.

DHS had asserted that a public accommodation must be a physical place or establishment of facility. The Iowa Supreme Court affirmed that the DHS is a “government unit” in accordance with the ICRA definition (and dictionary definitions) and that prior cases before the court support the argument that the ICRA does not define public accommodation as a physical place. As Medicaid offers benefits to the public, it was ruled to be a public accommodation.

DHS had further asserted that Iowa Admin. Code r. 441–78.1 (4) did not consist of a gender discriminatory provision because Medicaid beneficiaries were not entitled to gender-affirming surgery, whether the beneficiary was transgender or not. DHS argued that the exclusion of coverage for these surgeries, including surgery related to “transsexualism,” related to broad categories of excluded surgeries used more for cosmetic and psychological purposes. The Iowa Supreme Court noted that the Iowa legislature modified the ICRA in 2007, adding “gender identity” as a protected group if it served as the basis for denial of services. The court therefore found that Iowa Admin. Code r. 441–78.1 (4) discriminates based on gender and violates the equal protection clause of the ICRA since the ICRA encompasses transgender individuals and the discrimination is based on the nonconformity between Ms. Good and Ms. Beal's gender identity and biological sex. Therefore, DHS and its agents were prohibited from denying coverage for the surgeries because Iowa Admin. Code r. 441–78.1 (4) violates the ICRA's prohibition on gender-identity discrimination. The court did not accept the DHS argument that the gender-affirming surgeries were cosmetic or being performed primarily for psychological purposes. The court further noted that coverage for some surgeries of a cosmetic nature was allowable, such as revision of scarring or congenital anomaly corrections, but that coverage for surgery of a transgender individual was not allowable and therefore discriminatory. Because it found that the 2007 amended ICRA was violated, the Iowa Supreme Court did not address the other matters raised on appeal.