Federal appeals court rules West Virginia Medicaid coverage exclusion of ‘sex-change’ surgery is legal

Changing course because of two 2025 US Supreme Court decisions, an all-Republican three-judge panel of the US Court of Appeals for the 4th Circuit on March 10 reversed a district court decision that had found the exclusion of Medicaid coverage for “sex change” surgery to violate the Equal Protection Clause of the 14th Amendment of the US Constitution, the anti-discrimination provision of the Affordable Care Act (ACA), and the Medicaid Act. The case began when two transgender individuals whose doctors sought approval from West Virginia Medicaid for coverage to provide gender-affirming surgical care was denied because of the state Medicaid agency’s policy of not covering “transsexual” or “sex change” surgeries that are sought to treat gender dysphoria. The plaintiffs sued (and subsequently obtained class action certification) to challenge the policy on constitutional and statutory grounds. On August 2, 2022, US District Judge Robert C. Chambers, Jr., a Clinton appointee, granted summary judgment to the plaintiffs, ordering the West Virginia Medicaid plan to drop the exclusion. Judge Chambers found that the exclusion was a facial violation of the Equal Protection Clause, the ACA, and the Medicaid Act, because it denied equal treatment on the basis of transgender status, requiring heightened scrutiny, and that the state failed to put forward a compelling interest to support the exclusion. This ruling was consistent with prior 4th Circuit rulings in favor of transgender litigants in discrimination cases. A similar ruling involving an exclusionary policy by the North Carolina government’s employee health insurance program was appealed to the 4th Circuit at about the same time as West Virginia appealed Judge Chambers’ ruling. The court consolidated the two cases for consideration. The 4th Circuit then affirmed Judge Chambers’ ruling and the North Carolina ruling, in an en banc (full court) decision on April 29, 2024.  The states then sought review by the Supreme Court. While the states’ petitions were pending at the Supreme Court, that court decided two cases that played a big role in the 4th Circuit’s decision to reverse Judge Chambers’ ruling. In Medina v. Planned Parenthood South Atlantic, the Supreme Court ruled that individuals may not sue under the Medicaid Act to contest exclusions of coverage under state Medicaid plans. In US v. Skrmetti, the court ruled that Tennessee’s statutory ban on gender-affirming care for minors did not violate the Equal Protection Clause. On June 20, 2025, after announcing its Skrmetti ruling, the Supreme Court vacated the 4th Circuit’s decision in the West Virginia and North Carolina cases and returned the cases to the 4th Circuit for “further consideration” in light of Skrmetti. The 4th Circuit then sent the North Carolina case back to the district court in that state for reconsideration, and assigned the West Virginia case to a three-judge panel consisting of Circuit Judges Paul V. Niemeyer (a George HW Bush appointee), Julius N. Richardson and Allison Jones Rushing (Trump appointees). Judge Richardson, who was one of the dissenters from the 4th Circuit’s prior affirmance of Judge Chambers’ ruling, wrote the opinion for the panel. Disposing of the Medicaid Act ruling was simple for the court.  Under the Medina decision, the plaintiffs could not challenge West Virginia’s exclusion under the Medicaid Act, so Chambers was reversed as to that. Under US v. Skrmetti, according to Richardson’s opinion, it was clear that the exclusionary policy, contrary to Judge Chambers’ ruling, did not discriminate based on transgender status, as the Supreme Court had ruled that Tennessee’s ban on gender-affirming care for minors did not discriminate based on the transgender status of the individuals.  The court noted that the Medicaid program excluded a “long list of treatments from coverage,” of which this was but one, many of which were justified based on cost or a judgment about whether they were necessary, and that on its face this exclusion was not directed at people because of their sex or transgender status, but rather reflected a judgment by West Virginia that it did not want to pay for this kind of treatment.  Seizing upon the reasoning of the Supreme Court in Skrmetti, the court found that the exclusion did not target people because of their gender identity, but rather because of their diagnosis of gender dysphoria. If you think about this long enough, you may reach the decision that this hair-splitting logic defies reality, as the dissenters in Skrmetti argued. For purposes of Equal Protection, discrimination based on a diagnostic category does not involve a “suspect classification” and thus does not require “heightened scrutiny” from the court. Instead, the challenged policy will be upheld if the state advances a rational, non-discriminatory reason for the policy. In this case, the court said that the high expense for gender-affirming surgery and the “controversy” among health care professionals about whether surgical procedures for gender transition are necessary or appropriate were sufficient reasons for a state to decide not to pay for it, in light of limited resources for health care. The court did not question the plaintiffs’ argument that the anti-discrimination provision of the ACA forbids discrimination by insurers on the basis of gender identity under its ban on sex discrimination, but, once again, the court insisted that under Skrmetti’s analysis an exclusion of gender-affirming surgery for purposes of gender transition was not a form of discrimination on the basis of sex, so the anti-discrimination provision of the ACA was not violated. Dissenting Supreme Court justices in the Skrmetti case argued to the contrary, but the Supreme Court’s majority opinion is the governing precedent for federal courts of appeals, and Judge Richardson’s opinion for the 4th Circuit panel argues that the court is compelled to abandon prior 4th Circuit precedent and apply Skrmetti’s reasoning. Indeed, the Supreme Court’s action of vacating the prior 4th Circuit decision in this case and sending it back to the court of appeals for reconsideration clearly signaled that a majority of the Justices believed that Skrmetti required this different outcome. But the opinion is important for another reason, not really addressed by Judge Richardson. As a practical matter, one might view Skrmetti as a limited decision about whether a state can outlaw a particular treatment for minors. But this case is not about minors. The plaintiffs are adults. And this court rejects a narrow application of Skrmetti. The plaintiffs in this case can obtain the treatment they desire if they can find a way to finance it without Medicaid insurance coverage, as West Virginia has not outlawed the performance of gender-affirming surgery on adults. But several “red states” have been considering more extensive limitations on the performance of gender-affirming surgery on adults as well as minors, and the reasoning of this decision suggests that challenging such bans using the Equal Protection Clause or the ACA may be unsuccessful. As yet there is no Supreme Court precedent on the question of outlawing gender-affirming care for adults, but in light of the trend of legislation in some “red states,” it may be just a matter of time before the courts will have to confront that issue.