Iowa court strikes down state ban on Medicaid coverage for transgender care

A two-decade-old state administrative rule “clearly discriminates against transgender Medicaid recipients on the basis of gender identity by excluding coverage for medically necessary gender affirming surgery” while covering the same surgeries for non-transgender Iowans, a Polk County District Court ruled on June 7. Chief Judge Arthur Gamble found the rule violates both Article I, section 6 of the Iowa Constitution, which guarantees equal protection, and the Iowa Civil Rights Act, which has prohibited discrimination on the basis of gender identity since 2007.

The ACLU of Iowa filed this lawsuit last September on behalf of EerieAnna Good, a trans woman who was denied Medicaid coverage for transition-related surgical care. Carol Ann Beal joined the case as a plaintiff later, after the Iowa Department of Human Services denied her appeal of a similar Medicaid denial.

Normally, Medicaid covers all procedures a doctor deems medically necessary. But a state administrative rule adopted in 1995 excludes “Procedures related to transsexualism, hermaphroditism, gender identity disorders, or body dysmorphic disorders,” as well as “Breast augmentation mammoplasty, surgical insertion of prosthetic testicles, penile implant procedures, and surgeries for the purpose of sex reassignment.” The ACLU argued it is discriminatory for Medicaid to cover medically necessary surgery for a non-transgender Iowan but deny coverage for someone who is transitioning.

Judge Gamble rejected almost every legal argument the Iowa Attorney General’s office raised on behalf of the DHS. He ordered that the language “excluding coverage for sex reassignment surgery for transsexualism” be struck from the administrative rule and that the DHS apply remaining language in a way that allows Medicaid coverage for “medically necessary gender affirming surgery for the treatment of Gender Dysphoria.”

The state has 30 days to decide whether to appeal to the Iowa Supreme Court. The DHS had no comment on the decision, Courtney Crowder reported for the Des Moines Register, and the Attorney General’s office said only that lawyers were “studying the ruling and consulting with DHS.”

Here’s the District Court ruling in full. I summarized key points below.

Iowa DHS policy is not grounded in current medical standards of practice.

“There is consensus among mainstream medical professionals regarding the appropriateness and medical necessity of surgical care for Gender Dysphoria,” the judge noted. But “Since the adoption of the Regulation in 1995, DHS has not commissioned any updates or new studies on the subject of transsexualism and sex reassignment surgeries.”

How the DHS administers Medicaid is covered under the Iowa Civil Rights Act.

Lawyers for the state argued that the law should not apply, because “within the context of the remaining definition of ‘public accommodation,’ the term ‘government unit’ should be viewed as solely a physical place, establishment, or facility.” Judge Gamble found the argument unconvincing. “Government unit” is commonly understood to include “state and local government agencies.” While Iowa Medicaid may not itself be a “public accommodation,” DHS is one as “the governmental unit tasked with implementing and overseeing Iowa Medicaid services provided by MCOs [managed-care organizations, the private insurers who manage Medicaid].”

The history of the code language demonstrates discriminatory intent.

Judge Gamble’s opinion repeatedly referred to “current medical consensus,” undisputed by the DHS or state attorneys, that gender affirming surgery can be medically necessary. Yet the administrative code

still expressly singles out sex reassignment surgery and other cosmetic surgeries related to “transsexualism” as excluded from coverage.

The discriminatory nature of this express exclusion is illustrated by the history behind the exclusionary language. As previously discussed, the language of the Regulation expressly excluding sex reassignment surgery and other surgeries related to “transsexualism” was added in 1995 in response to the Eighth Circuit finding that DHS was otherwise required to cover such procedures. This was also after DHS had received Medicaid claims for sex reassignment surgery in 1991 that DHS ultimately concluded it was required to cover.66 The language of the Regulation was added for the express purpose of denying coverage for sex reassignment surgery. Thus, through the Regulation, DHS is excluding Iowa Medicaid coverage for surgical treatment of Gender Dysphoria purely on the basis that it is treatment of Gender Dysphoria of transgender individuals.67

At the time the Regulation was adopted more than two decades ago, the IRCA did not prohibit discrimination on the basis of gender identity. It does now. At the time the Regulation was adopted, the medical consensus supported the notion that sex reassignment surgery was cosmetic surgery for a psychological condition akin to Body Dysmorphic Disorder. However, as Dr. Ettner’s affidavit demonstrates, unlike Body Dysmorphic Disorder, Gender Dysphoria has a biological component and the current medical consensus no longer supports the conclusion that gender affirming surgery is not therapeutic. Medical thinking and Iowa law has changed. The Regulation has not kept pace with law and medicine.

Excluding Medicaid coverage for transgender care serves no “important governmental objective.”

The District Court reviewed the administrative rule under intermediate or “heightened scrutiny,” which “generally applies in cases involving a ‘quasi-suspect’ classification, such as gender, sexual orientation, or illegitimacy.” To pass this test, the government entity must show the rule or law being challenged is “substantially related to a sufficiently important governmental interest.” The state asserted that the rule would save money. But Judge Gamble observed that in its Varnum v Brien decision, the Iowa Supreme Court rejected “a similar argument in the context of excluding same-sex couples from civil marriage.”

DHS also claimed the rule was drafted to reflect the “evolving nature of the diagnosis and treatment of gender identity disorder and the disagreement regarding the efficacy of sex reassignment surgery.” However,

the Court finds that the medical consensus has shifted since the exclusion of sex reassignment was first added to the Regulation back in 1995. Notably, despite this evolution within the medical community, DHS has not reviewed or studied the language regarding sex reassignment surgery in the Regulation since its original adoption. This weighs heavily against DHS’s position. Finally, even assuming DHS’s description of the drafting of the Regulation was accurate, that does not justify enforcement of the Regulation today. The outdated medical evidence that formed the basis for the adoption of the Regulation does not permanently validate it. As Petitioners proved, the medical consensus now holds that sex reassignment surgery is sometimes medically necessary and addresses far more than just the psychological aspects of Gender Dysphoria. It is the standard of care for the treatment of the biological components of Gender Dysphoria. Therefore, the Court does not find DHS’ argument persuasive.

Although the DHS maintained that the rule was not discriminatory in intent,

The Regulation clearly discriminates against transgender Medicaid recipients on the basis of gender identity by excluding coverage for medically necessary gender affirming surgery as treatment for the biological components of Gender Dysphoria while covering the same surgical procedures for other biological as well as psychological conditions of non-transgender individuals. […]

As previously noted, the Regulation has not kept pace with law and medicine. […] In this context, DHS has failed to provide an “exceedingly persuasive” justification for how the disparate treatment of transgender individuals in need of sex reassignment surgeries under the Regulation is substantially related to an important governmental interest. Thus, the Court concludes the gender identity based exclusion of medically necessary gender affirming surgery and other therapeutic surgeries performed as treatment for Gender Dysphoria does not further in a substantial way an important governmental objective. Therefore, the Regulation does not satisfy heightened or intermediate scrutiny.111

Excluding transgender care under Medicaid would fail even a “rational basis” standard for constitutionality.

Attorneys for the state wanted the court to adopt a less stringent “rational basis” standard, under which “the statute or regulation in question is presumed constitutional unless the challenging party can negate every reasonable basis for the classification that might support disparate treatment.” The DHS held that the rule “serves the purpose of conserving limited state resources” and “reflects the evolving nature of the diagnosis and treatment of Gender Dysphoria.” Judge Gamble wasn’t buying it.

DHS offers no persuasive justification for this disparate treatment. While actual proof of specific cost savings is not required, there must be some realistically conceivable, fact based, plausible reason to believe that denying coverage to the subset of transgender Medicaid recipients who can establish a medical necessity for gender affirming surgery is unaffordable. The Court is not convinced that singling out transgender individuals for cost saving in this way is rational.129 Justifying a discriminatory classification without at least some credible rationale is the epitome of an arbitrary classification. This is akin to the tenuous justification offered by the State in Racing Ass’n of Central Iowa v. Fitzgerald, in which the Iowa Supreme Court rejected a financial benefits argument for disparate tax treatment between excursion boats and racing tracks.130 A financial benefit to the State resulting from discrimination against transgender individuals in Iowa Medicaid based upon their status as transgender is palpably arbitrary. […]

Petitioners’ have provided ample medical evidence establishing the current medical consensus regarding the diagnosis of Gender Dysphoria and how, in some cases, sex reassignment surgery can be medically necessary to treat the condition. DHS cannot rely on outdated medical evidence as a timeless justification for the Regulation. In order to pass rational basis review, the Regulation must be realistically conceivable, have a basis in fact, and not be so weak that the classification must be viewed as arbitrary. The evidence in the record demonstrates that, even assuming there was once a justification for the classification as reflected by the Iowa Foundation Report and the rulemaking process, the medical consensus no longer supports it.

The DHS decision to deny coverage was “arbitrary and capricious.”

The relevant section of administrative code has not been amended since 1995, “despite the general practice of Iowa administrative agencies to conduct regular reviews of their administrative rules to ensure conformity to the Iowa Code and Constitution.” The state legislature approved and Governor Chet Culver signed amendments to the Iowa Civil Rights Act in 2007.

While the Court understands that DHS is in some respect obligated to enforce the administrative rules as previously adopted, it also owes an obligation to ensure those rules conform to the statutes like the ICRA and the Iowa Constitution which trump any prior administrative rule. DHS also has an obligation to keep up with the medical science. DHS failed to do so when it denied coverage to Good and Beal for medically necessary gender affirming surgery. This decision was made without regard to the law and facts. The agency acted in the face of evidence upon which there is no room for difference of opinion among reasonable minds. The exclusion of coverage was unreasonable, arbitrary and capricious.

The DHS can’t relitigate whether gender affirming surgery is medically necessary for these plaintiffs.

Presumably sensing they were on weak ground regarding the discriminatory code language, the state’s attorneys had asked the court to “limit its ruling in several respects” if it found in favor of the plaintiffs on the merits.

First, DHS argues that the Court should remand the case for a rehearing on the medical necessity of Petitioners’ requested procedures. Second, it requests that the Court not invalidate the entirety of the Regulation, but only the challenged provisions. Third, DHS requests that this Court defer implementation of the ruling to DHS and the MCOs, granting them “an appropriate amount of time” to develop criteria for evaluating Medicaid requests for sex reassignment procedures.

Judge Gamble’s response: no, not relevant, and no.

DHS had ample opportunity to lay out all of the evidence supporting denial Petitioners’ requests on the basis of medical necessity.

It chose not to. DHS should not have the opportunity to mend its hold by re-litigating the medical necessity of gender affirming surgery for Gender Dysphoria when it had the opportunity to do so at the administrative hearings and chose to pass.149 Parties, including administrative agencies, are not afforded endless bites at the apple.150 Absent a good cause showing for why DHS or the MCOs were somehow unable to present contrary medical evidence to challenge that provided by Petitioners, the Court sees no reason to remand these cases for rehearing on the issue of medical necessity. To do so would force Petitioners to endure further delay of treatment the trial of an evidentiary issue DHS already had a chance to address but simply chose not to.

Therefore, the Court rejects DHS’s request for remand for further hearings.

Regarding the second request, “the concerns put forward by DHS appear unfounded or moot,” since the plaintiffs were not asking the court to invalidate the rule’s broad exclusion of “psychologically-motivated surgeries.”

As for giving the agency more time to develop new criteria for covering transgender-related medical care, “The Regulation violates the IRCA and the Iowa Constitution. New criteria based upon gender identity would be equally suspect.153 As a result, the Court rejects DHS’s request for additional time to develop criteria for evaluating sex reassignment surgery requests.”

Happy Pride Month to all of Bleeding Heartland’s LGBTQ readers. On a related note: if you missed it earlier this year, Gwen Hope’s post about trans health care “islands” in Iowa and nationally is a must-read.

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