Federal Court Allows Transgender Challenge to NY Medicaid Regulations to Continue

U.S. District Judge Jed Rakoff in Manhattan  denied most of New York State’s motion to dismiss a lawsuit challenging various limitations in the state’s Medicaid program relating to treatment for gender dysphoria.   Judge Rakoff did not immediately issue a written opinion supporting his June 26 ruling, indicating that one would be issued later.  The case is Cruz v. Zucker, No. 14-CV-4456 (JSR)(GWG) (S.D.N.Y., June 26, 2015).

Medicaid is a joint federal-state program to provide health care coverage for medically needy people who lack the financial resources to pay for adequate health care.  States are not required to have a Medicaid program, but if they do they must comply with federal standards in order to be eligible for federal money to help pay for the program.  In general, the federal program requires coverage for medically necessary care.

The lawsuit was brought on behalf of a class of transgender Medicaid-eligible New Yorkers seeking various medical procedures as a part of their gender transition.  It was originally filed in June 2014 to challenge a New York State Medicaid regulation banning all coverage for sex reassignment treatments and procedures, which had been adopted during the Pataki Administration in 1998.  The lawsuit arose from frustration about lack of response by the Cuomo Administration to continuing demands to change the policy, in an environment where federal Medicaid and Medicare programs had been evolving towards greater coverage in this area.  Indeed, the U.S. Tax Court ruled just a few years ago that costs for gender transition treatment could be tax deductible as medically necessary, reversing a long-time policy, and just weeks ago the federal Office of Personnel Management notified insurance companies covering federal employees that they were required to cover such expenses.  This New York lawsuit soon triggered a response from the state, which adopted a new regulation effective on March 11, 2015.

However, the new regulation only went part way towards the plaintiffs’ goal of achieving complete coverage for sex-reassignment procedures under Medicaid.  They quickly filed an amended complaint, attacking the failure of the new regulation to provide complete coverage.

The old regulation was a blanket prohibition, stating: “Payment is not available for care, services, drugs, or supplies rendered for the purpose of gender reassignment (also known as transsexual surgery) or any care, services, drugs, or supplies intended to promote such treatment.”

The new regulation states that “payment is available for medically necessary hormone therapy and/or gender reassignment surgery for the treatment of gender dysphoria.”  Payment for hormone therapy is available even if the individual is not seeking surgical reassignment.  Two qualified New York State licensed health care professionals must certify that the individual suffers from gender dysphoria  and that surgery is medically necessary.  The regulation excludes coverage for people under age 18, and will not cover gender reassignment surgery that would render somebody sterile unless they are at least 21.  This is most significant for transgender women, since the removal of male genitalia and reproductive system organs incident to transition always produces sterility.  The regulation explicitly excludes a long list of procedures that are deemed “cosmetic” and thus not “medically necessary,” but that transgender individuals may need in order to accomplish a complete transition consistent with their gender identity.

The lawsuit challenges the exclusions of coverage for younger transgender people, and sharply disputes the contention that the various procedures labeled as “cosmetic” should be excluded.  The mindset of those who drafted the regulation is exemplified by its explanation that “cosmetic surgery, services, and procedures refers to anything solely directed at improving an individual’s appearance.”  Of course, Medicaid would cover these procedures in other contexts, such as reparative and cosmetic surgery for somebody who has suffered disfiguring injuries in a fire, auto crash or similar catastrophe, even though in such circumstance “improving an individual’s appearance” may be the primary goal of a particular procedure.  The point is that these procedures are not sought by transgender individuals solely to improve their appearance, but rather to bring their appearance into more full accord with their gender identity.

The plaintiffs argue that these additional procedures can be centrally important for a successful gender transition process.  The goal is not just to eliminate or modify unwanted genitalia and internal organs.  It is rather to assist the individual in achieving a physical form that is consistent with their gender identity and how it is expressed to the world.  The Complaint filed in this case spells out the problems encountered by some of the plaintiffs who were unable to access these procedures, which, they argue, are necessary for them to be able to present themselves in their desired gender.  An incomplete transition makes their transgender status obvious, “outing” them and leaving them vulnerable to harassment or worse.

The legal theory behind the lawsuit is that denial of these services to those under 18, and the blanket denial of a range of procedures that are necessary to effectuate a successful gender transition, violates the state’s obligations under the federal Medicaid statute to cover medically necessary care and also raises constitutional issues of unequal treatment, as transgender people are being excluded from access to treatments and procedures that are covered in other contexts.  The Complaint also alleges a violation of the non-discrimination requirements of the Affordable Care Act (ACA).

The Attorney General’s office quickly responded to the Amended Complaint by filing a motion to dismiss the case.  The office’s brief, submitted in the name of Attorney General Eric Schneiderman by Assistant Attorneys General John Gasior and Zoey S. Chenitz, argued that the 11th Amendment bars the plaintiffs’ constitutional claims, and that the Medicaid statute’s requirements are not enforceable by individuals in a federal lawsuit.  Furthermore, they argued, the exclusion of those under age 18 would not violate any provisions of the statutes that the plaintiffs rely upon, the denial of coverage for cosmetic procedures was not “ripe” for review based on the factual allegations in the Complaint, and, they argued, the Complaint did not even raise a plausible claim for violation of the specific Medicaid regulation upon which the plaintiffs are relying.

Judge Rakoff rejected most of the Attorney General’s arguments, at least at this early stage of the lawsuit for purposes of determining whether the case should be thrown out or allowed to continue.

According to a summary of his ruling published by the New York Law Journal on June 30, he refused to dismiss the claims based on “refusal to fully fund the treatment of gender identity disorder or gender dysphoria” including “refusing surgery for those under 18.”  He also refused to dismiss a sex-based discrimination claim under the ACA, but granted the state’s motion to dismiss an ACA claim for youth hormone therapy for those under 18.  He also dismissed a claim under a section of the Medicaid law requiring the state to have reasonable standards for determining eligibility for the extent of medical assistance.  Rakoff noted that the parties had agreed to dismiss the constitutional claim.  An explanation for his rejection of the arguments made by the Attorney General’s office in its brief awaits publication of an opinion.

The plaintiffs are represented by the Sylvia Rivera Law Project and the Legal Aid Society, with pro bono assistance from lawyers at the firm of Willkie Farr & Gallagher LLP.   Sumani Lanka, a Legal Aid Society attorney, told the Law Journal, “The state doesn’t really understand what gender identity is.  Gender identity isn’t just reassignment surgery – it has to do with how a person perceives themselves and identifies themselves.  It shouldn’t be that the state arbitrarily limits treatment that is medically necessary for gender dysphoria.”

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