More Thoughts On The Tax Court Ruling On GID Deductions

Earlier in the month, I commented on the U.S. Tax Court’s ruling on treatment for gender identity disorder that it qualifies as medical care under the Internal Revenue Code, and is therefore deductible.

The Huffington Post has an article on insurance coverage for GID related medical care. As some of you know if you have been following my blog. Most insurance policies do not cover any treatment for transsexual procedures, some insurance companies even go so far as not to cover heart attacks if you are taking hormones because it might have been cause by them. So it was with interest that I read the Huffington Post article,

Transgender Surgery is Deductible; Medical Coverage Coming

Joanne Herman
Posted: February 3, 2010 12:52 PM

…
The treatment procedure O'Donnabhain undertook is the generally accepted procedure set by the World Professional Association for Transgender Health (WPATH), a group of medical doctors, psychologists and other professionals. Its pre-qualification hurdles for surgery are some of the most rigorous existing for any medical procedure.

Ironically, this lawsuit might never have happened if transgender health care was covered by medical insurance, which it generally is not. How can something that is medically necessary not be covered by insurance?

The first reason is lack of general understanding about the seriousness of GID. Without this understanding "the surgery" can seem frivolous, just one step beyond a nose job. But the medical standards are based on results over time showing that people with GID are much happier after surgical treatment. If the IRS is now convinced, one can hope health insurance companies will soon fall in line.

The second reason is that insurance companies and employers fear that covering sex reassignment surgery will "break the bank." The experience of the City and County of San Francisco shows otherwise. San Francisco started covering transgender health care for municipal employees in 2001. In 2006 San Francisco disclosed it had collected $5.6 million for the coverage and had paid out only $386,417 on 39 claims, a 93% profit. Cost is clearly not the issue.

But how was it that San Francisco was so far off? Their actuaries knew there were twenty-seven transgender municipal employees, and therefore geared up to pay for thirty-five surgeries each year. But they missed the fact that many transgender people never have surgery and those that do generally only have it once in a lifetime. Actual cost experience has been no worse than that for gall bladder removal or heart surgery.

In a report by Horton, M. PhD on the cost of health care coverage for transgender individuals, she found that…

The survey found that the average cost for MTF SRS in 2001 was about $10,400 and for FTM primary surgery (top surgery) was about $8,500. FTM bottom surgical costs averaged about $9,500/patient. Total surgical cost, compared to the number of US residents in the 2000 US Census, is 5.3¢ per year.
Adding typical THB [Transgender Health Benefits] nonsurgical cost per resident for mental health (.7¢,) Hormones (6.6¢,) and doctors office visits (4.6¢,) the total estimated annual cost per resident would be 17.3¢. The margin of error analysis concludes that the total cost per resident might be as low as 9¢ or as high as $4.01. These costs represent the total cost, including employer and employee shares, and include any costs already being covered by the employer. Increased costs to employers would be less, probably 6.6¢ or less.

So why do businesses not provide health care for transgender procedures when the American Medical Association (AMA), the American Psychiatric Association (APA) and World Professional Association for Transgender Health (WPATH) all say that treatment for GID is a medical necessity?