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Flack v. Wisconsin Department of Health Services

United States District Court, W.D. Wisconsin

August 16, 2019

CODY FLACK, et al., Individually and on behalf of all others similarly situated Plaintiffs,



         Over a year ago, this court preliminarily enjoined enforcement of Wis. Admin. Code §§ DHS 107.03(23)-(24) (the “Challenged Exclusion”) against the originally named plaintiffs, Cody Flack and Sara Ann McKenzie, who are transgender individuals with severe gender dysphoria. The Challenged Exclusion denied coverage for medically prescribed gender-conforming surgery and related hormones under Wisconsin Medicaid. Since then, the court broadened the preliminary injunction enjoining enforcement during the pendency of the lawsuit and certified a class.[1] (Prelim. Injunction Op. & Order (dkt. #70) 39; Class Cert. & Prelim. Injunction Amend. Op. (dkt. #150) 27.) Presently before the court is plaintiffs' motion for summary judgment, seeking declaratory and permanent injunctive relief. (Pls.' Mot. Summ. J. (dkt. #151) 1-2.) For the reasons that follow, plaintiffs' motion will be granted.[2]


         A. Gender Dysphoria

         1. Diagnosis

         At its most basic level, gender identity is understood by the medical profession to mean one's internal sense of one's sex. Everyone has a gender identity, and for most people, their gender identity is consistent with the sex designated on their birth certificate (variously referred to in medical literature as one's “assigned, ” “designated” or “natal” sex). Transgender people have a gender identity that differs from their natal sex. Accordingly, a transgender woman was assigned a natal sex of male but has a female gender identity, while a transgender man was assigned a natal sex of female but has a male gender identity.

         According to plaintiffs' experts, one's gender identity is an immutable characteristic. Defendants dispute this. In particular, defendants argue that “[o]ne's self-awareness as male or female changes gradually during infant life and childhood” based on “interactions with parents, peers, and environment, ” noting that “[n]ormative psychological literature” fails “[to] address if and when gender identity becomes crystallized and what factors contribute to the development of a gender identity that is not congruent with the gender of rearing.” (Defs.' Resp. to Pls.' PFOF (dkt. #183) ¶¶ 35-36 (quoting Endocrine Society's Clinical Practice Guidelines (dkt. #166-9) 7).)

         Regardless of its origins, there is now a consensus within the medical profession that gender dysphoria is a serious medical condition, which if left untreated or inadequately treated can cause adverse symptoms, such as anxiety, depression, serious mental distress, self-harm, and suicidal ideation, all of which can cause social and occupational dysfunction. DSM-5 contains the psychiatric consensus as to its definition, diagnostic criteria and features:

Gender dysphoria refers to the distress that may accompany the incongruence between one's experienced or expressed gender and one's assigned gender. Although not all individuals will experience distress as a result of such incongruence, many are distressed if the desired physical interventions by means of hormones and/or surgery are not available. The current term is more descriptive than the previous DSM-IV term gender identity disorder and focuses on dysphoria as the clinical problem, not identity per se.

(DSM-5 (dkt. #21-1) 5.)[4] Not every transgender person suffers from gender dysphoria, and for those who do, the severity of the symptoms and necessary treatment will vary by individual.

         2. Treatment

         The World Professional Association of Transgender Health outlines the clinical guidelines for treating gender dysphoria in its Standards of Care for the Health of Transsexual, Transgender, and Gender Nonconforming People, 7th Edition (2011) (the “WPATH Standards of Care”).[5] The WPATH Standards of Care identify psychotherapy, hormone therapy, and a No. of surgical procedures as accepted treatment options for gender dysphoria. In 2017, the Endocrine Society also published clinical practice guidelines addressing hormone treatments for gender dysphoria.[6]

         Dr. Julie Sager, DHS's medical director for Wisconsin Medicaid's Bureau of Benefits Management (“BBM”) from 2016 until April 24, 2019, considered both sources to be generally accepted in the medical community and to outline the appropriate standards for assessing the medical necessity of treatment for gender dysphoria. Transition-related medical interventions have the following goals: (1) preventing or eliminating the development of unwanted secondary sex characteristics of the assigned sex; (2) promoting or reconstructing the development of desired secondary sex characteristics of the sex associated with the patient's gender identity; (3) reducing symptoms of gender dysphoria; and (4) enhancing the patient's ability to “pass” as the sex associated with the patient's gender identity, decreasing harassment, mistreatment, and other discrimination to which transgender people are subjected because they are gender nonconforming.

         The WPATH Standards of Care state that “sex reassignment surgery is effective and medically necessary, ” while also recognizing that many transgender people who are diagnosed with gender dysphoria will not require surgery. (WPATH Standards of Care (dkt. #166-8) 61 (capitalization altered).) “While most professionals agree that genital surgery and mastectomy cannot be considered purely cosmetic, opinions diverge as to what degree other surgical procedures (e.g., breast augmentation, facial feminization surgery) can be considered purely reconstructive.” (Id. at 65.) For appropriate candidates, however, major medical organizations, including the American Medical Association, Endocrine Society, and American Psychiatric Association view gender-confirming surgeries as medically accepted, safe, and effective treatments for severe gender dysphoria. Even defendants acknowledge that DHS does not consider surgical treatments for gender dysphoria to be experimental. (See Prelim. Injunction Op. & Order (dkt. #70) 26 n.22 (recognizing defendants' concession).)

         B. Wisconsin Medicaid

         Medicaid, a joint federal-state program, was established in 1965 under Title XIX of the Social Security Act to provide medical assistance to eligible low-income individuals. See 42 U.S.C. §§ 1396-1396w-5 (the “Medicaid Act”). Medicaid allows states to provide medical services to individuals whose resources and income are insufficient to cover the cost of necessary medical services through federal reimbursement to participating states for a substantial portion of the medical costs. The program's total budget is approximately $9.7 billion and approximately 1.2 million people rely on Wisconsin Medicaid.

         Defendant Wisconsin Department of Health Services (“DHS”) is responsible for administering the Wisconsin Medicaid program. It receives Medicaid funding from the federal government, including reimbursement for over half the state's Medicaid expenditures from the U.S. Department of Health and Human Services.[7] Defendant Andrea Palm serves as DHS's secretary-designee, making her responsible for implementing the Medicaid Act consistent with both state and federal requirements. At the state level, Wisconsin Medicaid is governed by Wis.Stat. §§ 49.43-.65 and its implementing regulations are found at Wis. Admin. Code § DHS 101-09.

         Wisconsin Medicaid beneficiaries receive health care coverage through either a fee- for-service plan administered directly by DHS or an HMO Medicaid plan offered through third-party managed care organizations. For the fee-for-service plans, DHS uses its own staff to review prior authorization requests, instead of using a third-party administrator. The prior authorization staff typically uses DHS's published guidelines to make clinically appropriate and coverage determinations for requested services. Where published guidelines do not exist -- as is currently true here for gender-confirming surgeries -- medical doctors in BBM, which is part of DHS's Division of Medicaid Services, review the request under statutory and regulatory limits.[8] Dr. Lora Wiggins is BBM's chief medical officer and until April 24, 2019, Dr. Julie Sager served as BBM's medical director.

         The vast majority -- approximately 80% -- of Wisconsin Medicaid beneficiaries are enrolled in HMO Medicaid plans, which are offered by the following managed care organizations: (1) Blue Cross Blue Shield of Wisconsin; (2) Care Wisconsin Health Plan; (3) Children's Community Health Plan; (4) Dean Health Plan, Inc.; (5) Group Health Cooperative of Eau Claire; (6) Group Health Cooperative of South Central Wisconsin; (7) Independent Health Care Plan; (8) MHS Health Wisconsin; (9) MercyCare Insurance Company; (10) Molina Healthcare of Wisconsin; (11) Network Health Plan; (12) Quartz Health Solutions, Inc.; (13) Security Health Plan; (14) Trilogy Health Insurance, Inc.; and (15) UnitedHealthcare Community Plan.[9] These managed care organizations are responsible for administering, managing and overseeing the Medicaid benefits provided to enrolled beneficiaries in their plans in accordance with DHS's published guidelines and minimum standards. Accordingly, each managed care organization's clinical staff is responsible for reviewing and addressing prior authorization requests. Following a prior authorization denial, a beneficiary has the option of submitting his or her request to DHS for a determination whether DHS would have covered the service under the DHS fee-for-service plan. If the treatment was medically necessary and the fee-for-service plan would have covered it, DHS compels the managed care organization to cover the treatment as well.

         C. Challenged Exclusion

         1. Overview

         The Medicaid regulations were amended to include Wis. Admin. Code §§ DHS 107.03(23)-(24) in 1996, and they have been enforced since 1997, resulting in the denial of coverage for medical and surgical treatment for gender dysphoria for a majority of the period since.[10] They exclude from Wisconsin Medicaid coverage “[d]rugs, including hormone therapy, associated with transsexual surgery or medically unnecessary alteration of sexual anatomy or characteristics” and “[t]ranssexual surgery.” Wis. Admin. Code §§ DHS 107.03(23)-(24).[11] “Transsexual surgery” is not defined in the regulations, but DHS interprets it to mean any surgical procedure intended to treat gender dysphoria.[12]Across the country, only nine states -- including Wisconsin -- have categorical Medicaid exclusions on gender-confirming healthcare.

         Even though managed care organizations offering Wisconsin Medicaid plans are primarily responsible for enforcing the Challenged Exclusion by denying their plan members' prior authorization requests for services and treatment, DHS has not provided the managed care organizations formal guidance on how to interpret the Challenged Exclusion. Participating managed care organizations have denied coverage to transgender beneficiaries for gender-confirming treatments, including hormone therapy, surgery and related services under the Challenged Exclusion.

         2. DHS's Evaluation of the Exclusion

         When the Challenged Exclusion went into effect on February 1, 1997, DHS's predecessor, the Wisconsin Department of Family and Health Services, opined that the excluded services were “medically unnecessary” and that the Challenged Exclusion was “expected to result in nominal savings for state government.”[13] (Clearinghouse Rule 96-154 (dkt. #21-12) 2, 3; Fiscal Estimate (dkt. #21-14) 2.) However, DHS has been unable to find evidence that before implementation of the Challenged Exclusion it or its predecessor ever found or opined that the excluded services were experimental, ineffective or unsafe.[14] Likewise, DHS is unaware of any information indicating that the conclusion that the excluded services were not medically necessary was based on any systematic study or review of the medical literature. Nor is DHS aware of information indicating that it undertook any study or review of the costs associated with enforcing, amending or eliminating the Challenged Exclusion between its effective date and the start of this lawsuit.

         Since the filing of this lawsuit, the only investigations into the financial impact on DHS, Wisconsin Medicaid or the State of Wisconsin from enforcing, amending or eliminating the Challenged Exclusion were the August and November 2018 reports of David Williams, submitted in connection with this lawsuit. Similarly, the only investigation into the safety or efficacy of the medical or surgical treatments for gender dysphoria performed by DHS since February 1, 1997, were the reports of Lawrence Mayer, Michelle Ostrander, Chester Schmidt and Daniel Sutphin, also submitted in connection with this lawsuit. In contrast, DHS's own medical providers, the individuals charged with making clinical coverage determinations for Wisconsin Medicaid, acknowledge that gender-confirming hormone and surgical treatments for gender dysphoria can be medically necessary and that the Challenged Exclusion conflicts with current medical practice.[15]

         Finally, since its enactment, neither DHS nor its predecessor have studied the public health effects or costs of enforcing, amending or eliminating the Challenged Exclusion outside of this lawsuit. Nor is DHS aware of information indicating that it formally considered amending or eliminating the Challenged Exclusion between February 1, 1997, and July 17, 2016. DHS is also unaware of information indicating that it reviewed or considered the efficacy of the Challenged Exclusion following the publication of Version 7 of the WPATH Standards of Care in 2011 or DSM-5's information about the treatment of gender dysphoria following its publication in 2013. For purposes of this lawsuit, defendants estimate that removing the Challenged Exclusion and covering gender-confirming surgeries would cost between $300, 000 and $1.2 million annually. There is no dispute that these amounts are actuarially immaterial as they are equal to approximately 0.008% to 0.03% of the State's $3.9 billion share of Wisconsin Medicaid's $9.7 billion annual budget.

         3. Enforcement

         Since January 1, 2009, DHS has denied Wisconsin Medicaid coverage to ten fee-for-service beneficiaries; since 2014, HMOs administering Wisconsin Medicaid have denied numerous requests for gender-confirming surgical procedures, hormone treatments and other medical treatments and services. Each of these denials was based on application of the Challenged Exclusion, since the denied procedures are covered by Wisconsin Medicaid when deemed medically necessary for other conditions.

         Even so, DHS has no published coverage guidelines for gender-confirming health care, nor has it provided formal guidance to Wisconsin Medicaid HMOs about what is excluded by the Challenged Exclusion. As a result, before 2016, DHS sporadically covered chest surgeries to treat gender dysphoria under a regulation allowing coverage for procedures to treat a condition that significantly interferes with a person's personal/social adjustment or employability. See Wis. Admin. Code § DHS 107.06(2)(c) (requiring prior authorization for “[s]urgical or other medical procedures of questionable medical necessity but deemed advisable in order to correct conditions that may reasonably be assumed to significantly interfere with a recipient's personal or social adjustment or employability, an example of which is cosmetic surgery.”). Moreover, in 2016, BBM's clinical staff wrote to DHS management, opining that the Challenged Exclusion conflicted with federal law because of a final rule implementing the Affordable Care Act's § 1557 prohibiting discrimination on the basis of gender identity (the “Section 1557 Final Rule”) and asking if gender-confirming surgeries could be approved. BBM never received a formal written response. Instead, mid-level DHS management, which the parties agree was comprised of political appointees, explained informally that DHS's upper management instructed that BBM medical directors were to just leave prior authorization requests, so that they would expire.

         Following this letter, BBM received no further direction from DHS management, and BBM's clinical staff never received written clarification about what procedures were subject to the Challenged Exclusion. As a result, Dr. Sager and Dr. Wiggins concluded that the best option was to deny all requests for surgery and related gender-conforming hormones to comply with the Department's directives to the HMOs, even though doing so was contrary to their clinical opinion that the treatments could be both medically necessary and acceptable under current medical standards.

         On January 4, 2017, following a preliminary injunction from the Northern District of Texas enjoining part of the “Section 1557 Final Rule, ” the former director of Wisconsin Medicaid, Michael Heifetz, wrote contract administrators at Wisconsin managed care organizations, informing them that Wisconsin Medicaid would continue to enforce the Challenged Exclusion. (Jan. 4, 2017 Letter (dkt. #165-1) 1.) In part, the letter advised that:

The Department will continue to abide by its own regulations related to covered services under Medical Assistance/Medicaid (“MA”). Specifically, under the Department's MA regulations, transsexual surgery and medically unnecessary hormone therapy are not covered services. (See Wis. Admin. Code §§ DHS 107.03(23), (24); 107.10(4)(p)). . . . The Department will continue to make coverage decisions under its regulations, and will not reimburse entities for procedures that fall outside the Department's regulations.


         As a result, Wisconsin Medicaid's current policy under the Challenged Exclusion is to exclude from coverage certain medical procedures, services or treatments that are deemed medically necessary by a beneficiary's medical provider to treat gender dysphoria, even though those same procedures are covered when deemed medically necessary to treat other conditions. These treatments include orchiectomy, penectomy, vaginoplasty, mastectomy, reduction mammoplasty, breast reconstruction, hysterectomy, oophorectomy, and salingo-oophorectomy. The Challenged Exclusion also categorically excludes from coverage feminizing genitoplasty, chondrolaryngoplasty, phalloplasty, metoidioplasty, masculinizing genitoplasty, and intersex surgery (both male to female and female to male). While the Challenged Exclusion categorically excludes some hormone therapy treatments, Wisconsin Medicaid covers the following hormones when medically necessary to treat conditions other than ...

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