Federal Court Sustains New York Regulation Against Medicaid Coverage for Gender Transition

U.S. District Judge P. Kevin Castel ruled on August 5 in Casillas v. Daines, 2008 Westlaw 3157825 (S.D.N.Y.), that New York State’s adoption and enforcement of a regulation adopted by the Pataki Administration prohibiting the use of Medicaid funds to pay for sex reassignment treatment does not violate the constitutional right to Equal Protection of the law, and that an individual whose coverage for hormone treatment that had been provided for almost a quarter century until they were cut off by adoption of this regulation has no legal claim against the state for violating her rights to continued Medicaid coverage to maintain her feminine body characteristics..

The lawsuit was brought by Terri Casillas, a male-to-female transsexual who has identified as a woman since the age of 16, and was diagnosed with gender identity disorder in 1978.  She began living as a woman soon thereafter, and was receiving hormone therapy to conform her body to her gender identity with financial support from the New York Medicaid program beginning in 1980.   She alleges that as a result of this treatment she “developed breasts and her facial and body hair lessened so that she no longer needed to shave her facial hair.  She developed a more traditionally female body with a smaller waist and larger fat pockets around the hips.”  As a result of these physical changes, her psychological discomfort about her gender “dramatically lessened.”

In 1997, however, the New York State Department of Health published a notice proposing a regulation terminating Medicaid payment for any treatment supporting gender transition.  After an extended period for public comment, the regulation was adopted providing that “payment is not available for the 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.”  After the regulation went into effect, Ms. Casillas was notified that her Medicaid reimbursement for hormones would cease.  She was able to continue hormone treatment by using a “prescription drug discount plan” from September 2004 to May 2006, but ran out of funds and had to discontinue the treatment.

As a result of discontinuing hormone treatment, “she has suffered fatigue, nausea and body tremors,” wrote Judge Castel.  “Among other things,” she alleges in her complaint, “the size of [her] breasts decreased and she developed hair on her breasts.  Her voice deepened, and her skin became much rougher.”  She was “horrified” by these physical changes.  She consulted a specialist in January 2207, who advised that “hormones, orchiectomy and vaginoplasty are medically necessary to treat plaintiff’s GID,” an opinion “endorsed by her current psychologist as well as by a prior treating psychiatrist.”

But Medicaid refused to resume paying for hormones or to pay for the indicated surgery, leading to this lawsuit.  Casillas argued that she is entitled to be covered for these treatments under the federal Medicaid statute, which establishes minimum standards for participating state Medicaid programs, and that denial of this coverage denies her right to equal protection of the law.

Judge Castel found, based on a 2002 U.S. Supreme Court ruling, that under the relevant federal law concerning lawsuits for enforcement of federal rights, only an “unambiguously conferred right” can support a valid lawsuit.  The problem for Casillas was that Judge Castel found that the federal Medicaid statute does not unambiguously provide the right she is seeking to assert.  Indeed, the Medicaid statute allows states to impose substantive coverage limitations as a way of allocating scarce resources.  The test under the Medicaid statute is not whether a particular treatment is judged to be medically necessary by the individual’s physician, but whether the state is funding those procedures that they make available at an adequate level.

Casillas sought to argued that the regulation violates non-discrimination principles incorporated in the Medicaid statute itself.  New York State Medicaid covers hormone therapy and the surgical procedures she is seeking, in cases where those treatments are needed for other purposes.  The position of the state is that if somebody needs to have breasts removed to treat cancer, for example, or plastic surgery for bodily repair after an accident, or hormone therapy to cure some other medical condition, it will be made available.

At the time it adopted this regulation, the Department of Health cited the “responsibility both of allocating available resources and of assuring that services available to recipients are safe and effective,” noting that “there may remain only one medical facility [in the state] that continues to provide full scope of gender reassignment services,” and that “there are equally compelling arguments indicating that gender reassignment, involving the ablation of normal organs for which there is no medical necessity because of underlying disease or pathology in the organ, remains an experimental treatment, associated with serious complications.”  The Department also asserted that “there are serious questions about the long-term safety of administering testosterone at therapeutic levels, required for the remainder of the life of the person who undergoes gender reassignment.”

Having found that denying the treatment does not violate the federal Medicaid statute, the judge turned to Casillas’s constitutional claim, which received rather cursory analysis.   “Plaintiff does not assert membership in any suspect classification or that the denial of Medicaid reimbursement for gender reassignment surgeries implicates a fundamental right,” he wrote, meaning that her equal protection claim would be evaluated using the rationality test.  Castel decided that the reasons cited by the Department for adopting the regulation were sufficient to satisfy that test.

“The state agency’s assessment of public comment on the proposed regulation explained succinctly the reasons for denying reimbursement of gender reassignment surgeries and associated treatments.  It cited ‘serious complications’ from the surgeries and danger from life-long administration of estrogen.  This provided a more than sufficient rational basis which was related to legitimate government interests – the health of its citizens and the conservation of limited medical resources,” he concluded, failing to note the difference between estrogen, the treatment Casillas had been receiving, and testosterone, the hormone mentioned in the Department’s explanation quoted above.

While the court’s decision is written in respectful terms, it nonetheless reflects a toleration for the state Health Department’s view – at least during the Pataki Administration when this regulation was adopted – that gender identity disorder can be sufficiently treated through psychotherapy and that the state should not have to provide medical treatment, even when medical experts in gender identity concluded that it is medically necessary in a particular case.  Actually, given the change in state administrations, it is likely that an approach to the new policy-makers in the Department of Health for regulatory change would be more fruitful than pursuing the issue in the relatively conservative federal courts, where the current doctrinal situation seems stacked against a positive result.

Comments

[Harper Jean Tobin]

This decision is awful, and the facts are heartbreaking. I analyzed and wrote about this case for the Federal Rights Listserv I maintain on behalf of the National Senior Citizens Law Center. (The listserv focuses on court access issues, such as Section 1983.) Notably, unlike other Medicaid cases concerning transition therapies, here the state appears to have defended it (or at least the court analyzed it) largely on cost control grounds rather than medical necessity grounds.

While the decision clearly reflects a lack of sympathy for trans people and a readiness to accept the state's unsupported medical assertions, at bottom the decision is based on the strictures on Section 1983 suits and on an alarming federal reg permitting "utilization control procedures."

It might have been a different story if the case had been framed as a preemption suit under the Supremacy Clause, or if the reasonableness of that reg were challenged. Still, what precedent there is on this kind of Medicaid exclusion suggests that courts are generally wont to uphold them, medical necessity be damned.

[Art Leonard]

I agree that this is an awful decision. That said, I don't think alternative theories would have produced a different result, because I think this represents an unspoken judgment -- by the Pataki Administration Health Department when they adopted the regulation, and by the federal courts -- that this kind of treatment is not medically necessary and a frivolous waste of scarce Medicaid dollars. I totally disagree with that implicit judgment. From my experience of meeting transgender people and hearing their stories, I believe that for many transgender people these procedures are medically necessary for them to be able to lead a fulfilling life, and it would be to society's benefit to provide the assistance necessary for them to be able to do that.