Transgender and gender-diverse individuals often face significant mental health challenges compared to the general population. These challenges lead to a higher reliance on mental health services, including psychologists, counselors, and medications such as antidepressants and anxiety treatments. A new study suggests that funding gender-affirming medical care, including surgeries and hormone therapies, could not only improve mental health outcomes but also save Medicare millions of dollars.
The research highlights that gender dysphoria, the distress some transgender individuals feel about their gender identity, plays a crucial role in these mental health challenges. Gender-affirming medical care, which aligns individuals’ physical bodies with their gender identity through hormone therapy or surgery, has been shown to significantly improve mental health. However, until now, there has been little research on whether this improvement translates to reduced use of mental health services.
The Impact of Gender-Affirming Care
Two new studies have provided evidence that gender-affirming care can dramatically reduce the need for mental health services, resulting in substantial savings for Medicare. The studies examined the effects of hormone therapy and surgeries on transgender individuals’ use of mental health services before and after receiving care.
Gender-affirming care can include a range of procedures, such as mastectomies or breast surgeries to alter chest appearance, genital reconstructive surgeries, and hormonal treatments like testosterone and estrogen-based medications. While not every transgender person seeks this care, national surveys indicate that approximately 72% wish to access it during their lifetime.
Research consistently finds gender-affirming procedures have very low regret rates (less than 1%) compared to other surgeries, such as knee reconstruction (10%) and cancer procedures (24%).
Current Funding Challenges
Currently, gender-affirming surgeries are not consistently subsidized under Medicare, leading to significant out-of-pocket costs for individuals, ranging from $20,000 to $100,000. The government is considering adding these surgeries to Medicare, which would provide rebates for certain procedures, although patients would still need to cover substantial gaps.
Hormone therapy, on the other hand, is listed on the Pharmaceutical Benefits Scheme, allowing patients to pay a small co-payment for their prescriptions. However, access to this care is not uniform across Australia, with some regions, like the Northern Territory and Queensland, banning hormone therapy for those under 18.
Research Findings
The studies utilized de-identified Medicare records from 2012 to 2024 to track changes in mental health service usage among various groups of transgender individuals. The findings were striking:
- Before starting hormone therapy or undergoing surgery, transgender individuals used between 1.6 and 3.6 mental health services annually, compared to the average Australian who uses one service every two years.
- Five years after starting hormone therapy, there was a reduction of 0.3 to 2.6 fewer health services per year.
- For those who had chest surgery, government spending on mental health care decreased by $1,769 on average over five years.
- Genital surgery resulted in an average saving of $3,416 per person on mental health care over the same period.
Our calculations show, if the government paid $1,328 each for 89% of 11,883 trans people to receive top surgery, the total cost would be $14 million. Once we subtract the mental health savings over five years for this group ($18.7 million) this means Medicare would spend $4.6 million less over five years.
Economic and Social Implications
If gender-affirming surgeries are added to Medicare, the proposed rebates would be $1,328 for chest surgeries and $1,195 for genital surgeries. The research suggests that these initial costs would be offset by reduced government spending on mental health care within four to five years.
While the exact number of transgender Australians is unknown due to the lack of census data, surveys indicate a high demand for gender-affirming surgeries. Applying these rates to the study’s sample, significant cost savings are projected for Medicare over five years.
The potential savings are substantial, with estimates indicating a total of nearly $42 million in savings within five years. Given the unmet need for gender-affirming care, these numbers could be even higher.
When trans people have access to gender-affirming medical care, it reduces their distress and vastly improves their quality of life. Now, our findings show there are economic benefits too.
This research underscores the importance of considering both the health and economic benefits of funding gender-affirming care. As policymakers deliberate on adding these procedures to Medicare, the findings present a compelling case for change.
Karinna Saxby, Senior Research Fellow, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Brendan Nolan, Senior Research Fellow, Department of Medicine, The University of Melbourne; Clue Coman, PhD Student, Centre for Social Research in Health, UNSW Sydney, and Dennis Petrie, Professor of Health Economics, Centre for Health Economics, Monash University contributed to this research.
