Good news, bad news in Iowa Supreme Court's latest trans rights ruling

Iowa Medicaid can't ban coverage for gender-affirming surgery

May 13, 2023

*Aiden Vasquez and Mika Covington (with dog Teddy); photos courtesy of ACLU of Iowa*

This analysis first appeared at Bleeding Heartland and is shared here as part of the Iowa Writers Collaborative. For regular emails linking to all recent Bleeding Heartland articles and commentary, subscribe to the free Evening Heartland newsletter.

Disclosure: The ACLU of Iowa is representing Laura Belin and other plaintiffs in an open records lawsuit now pending in Polk County District Court. That case is unrelated to the litigation discussed here.

"We are celebrating today," said the ACLU of Iowa's legal director Rita Bettis Austen during a May 12 news conference to discuss the Iowa Supreme Court's latest decision in a transgender rights case.

In Vasquez and Covington v. Iowa Department of Human Services, the court dismissed as moot the state's appeal of a lower court ruling, which had found a 2019 law and related administrative rule to be unconstitutional. The result means the state cannot enforce a regulation barring Medicaid coverage for Iowans who need gender-affirming surgery.

Bettis Austen told reporters, "The importance of this truly cannot be overstated," adding that "Transgender Iowans on Medicaid can continue to receive the coverage for life-saving gender-affirming care, that they desperately need." Plaintiffs Aiden Vasquez and Mika Covington fought for nearly four years to obtain this outcome and can feel proud of making history for trans Iowans.

However, other aspects of the court's unanimous decision, authored by Justice Thomas Waterman, raise questions about how Iowa's high court may approach future challenges to state laws or policies designed to discriminate against transgender people.

BACKGROUND

This case grew out of Republican reaction to a landmark Iowa Supreme Court ruling from 2019. In that decision, known as Good v. Iowa Department of Human Resources, the justices unanimously held that the DHS regulation blocking Medicaid coverage for gender-affirming surgeries violated the Iowa Civil Rights Act, which has prohibited discrimination on the basis of gender identity since 2007.

Weeks later, Republican lawmakers amended the Iowa Civil Rights Act's section on "accommodations and services" to say that government-supported health plans are not required to pay for sex reassignment surgery. When Governor Kim Reynolds signed the provision into law, she expressly stated that her goal was to restore the earlier policy: "This takes it back to the way it's always been. […] This has been the state's position for decades."

Vasquez and Covington filed suit. Their physician had already determined that "bottom" surgery was medically necessary to treat their gender dysphoria, which was causing anxiety and depression. The plaintiffs challenged the constitutionality of both the amendment to the civil rights act and the DHS regulation, which "specifically excluded" Medicaid coverage for gender-affirming surgeries.

In November 2021, Polk County District Court Judge William Kelly ruled in favor of the plaintiffs. He ordered DHS to change its regulation and provide Medicaid coverage for medically necessary surgeries for transgender people.

Kelly also found the state law that carved out an exception to the Iowa Civil Rights Act violated the state constitution's equal protection guarantee. Crucially, the court determined the law could not survive even a "rational basis" analysis—the lowest bar for the government to clear when a statute or policy is challenged.

The state did not appeal the part of the ruling that struck down the DHS administrative rule, and the agency stopped enforcing that rule. But the state appealed the part of the decision that struck down the 2019 amendment to the civil rights act.

Among other things, the state argued the law "doesn’t prohibit gender-affirming surgery." Rather, the statute clarified that the civil rights act "shall not require any state or local government unit or tax-supported district to provide for sex reassignment surgery or any other cosmetic, reconstructive, or plastic surgery procedure related to transsexualism, hermaphroditism, gender identity disorder, or body dysmorphic disorder.” (The legislative record shows Republicans were seeking to stop Medicaid from paying for such surgeries.)

The DHS asked the court to reverse the lower court's determination and make clear that the statute amending the civil rights act was constitutional.

Representing the plaintiffs, the ACLU of Iowa argued that the Supreme Court should affirm the District Court's ruling and declare the discriminatory statute and policy unconstitutional.

"THAT IS NOT OUR ROLE"

The justices declined to rule on whether the 2019 law is constitutional. The full text of the Iowa Supreme Court's ruling in Vasquez is here.

Writing for the unanimous court, Justice Waterman said "Choices have consequences, and in this case, the appellant’s choices prompt us to dismiss its direct appeal as moot." After losing in District Court, the DHS agreed to pay for Vasquez's and Covington's surgeries and chose not to appeal the ruling on the Medicaid regulation.

The parties to this appeal essentially ask for an advisory opinion on what is now an academic question of constitutional law. That is not our role. DHS has committed to paying for bottom surgeries for Vasquez and Covington regardless of how we decide the constitutional issue. There is no longer a live controversy between these litigants over Medicaid reimbursement for their surgeries.

The Supreme Court did rule on the part of this litigation that wasn't moot. Plaintiffs had appealed the District Court's determination that they were not entitled to have their legal fees covered. The Iowa Supreme Court agreed with the lower court that "this judicial review proceeding is governed by Iowa Code chapter 17A," not the Iowa Civil Rights Act. Therefore, Vasquez and Covington were not entitled to recover fees to compensate their attorneys from the ACLU of Iowa and the Chicago-based law firm Nixon Peabody LLP.

THE POSITIVE IMPACT OF "HISTORY-MAKING LITIGATION"

In a news release, Vasquez, Covington, and their attorneys emphasized the victory at the heart of this case. Transgender Iowans can receive Medicaid coverage for surgery approved by their physicians. The ACLU described the outcome as "the latest chapter in a long history of litigation where courts have repeatedly affirmed the rights of transgender Iowans to medically necessary gender-affirming care and then the state has taken unconstitutional and discriminatory action to block access to that care."

Seth Horvath, the cooperating attorney who argued this case before the Iowa Supreme Court in January, commented, "Today’s decision leaves in place a well-reasoned district-court injunction finding that denying Medicaid coverage for gender-affirming surgery is illegal and unconstitutional in Iowa."

Vasquez said, "This has been a long, incredibly difficult fight for the last four years of my life. But I am proud to be a part of this history-making litigation and proud to be standing up for the justice of all transgender Iowans and hope to set a precedent for other states to do the same."

Covington recalled how "devastating" it was when the legislature "changed our civil rights act to take away that equal treatment for transgender people on Medicaid."

I am so glad that the decision from the district court saying the ban on gender-affirming care in Medicaid is unconstitutional is still in place.
This litigation has been a long and difficult journey. I am glad that Iowa Medicaid can no longer enforce the rule that specifically prohibits transgender people from getting certain types of surgery, including surgery they would cover for people who are not transgender. That's the way it should be when it comes to medically necessary care. A person needs surgery, recommended by their doctor, and insurance pays for it.

Not meaning to discount the importance of this result for trans Iowans, I was troubled by other portions of the Supreme Court decision.

"WE SAVE THE CONSTITUTIONAL ISSUES FOR ANOTHER DAY"

The Supreme Court's action left the District Court's ruling in place. But it did not address the lower court's conclusions about the 2019 law, which was an obvious attack on health care for transgender Iowans.

Justice Waterman wrote, "We save the constitutional issues for another day, presumably with a better-developed record." The decision later observed, "The issues concerning Medicaid coverage for adult sex reassignment surgery are of public importance and likely to recur [....] Why not wait for a proper challenge by new litigants to provide a ripe, concrete dispute?"

I hope Iowa Medicaid will not give rise to a similar case by denying coverage for someone else's gender-affirming surgery. But if that case arises, it is far from clear how the justices will approach it.

The Iowa Supreme Court's 2019 ruling in Good acknowledged that surgery can be part of "accepted standards of medical care to alleviate gender dysphoria," and noted the state "presented no evidence to the contrary." The decision stated the plaintiffs' physicians "have concluded that gender-affirming surgery is necessary to treat their gender dysphoria." The District Court opinion in Vasquez also accepted that this kind of procedure is medically necessary.

In contrast, the Iowa Supreme Court's Vasquez decision seems less committed to the idea that some patients have a genuine medical need for this kind of surgery. This passage comes from a longer paragraph, which argues that the record is insufficient to resolve the constitutional claims.

The record lacks any adversary-tested evidence concerning the efficacy of sex reassignment surgeries in improving the mental health of the recipients. No record was made of peer-reviewed scientific studies evaluating the medical necessity or efficacy of sex reassignment surgeries.

In addition, the decision left open the possibility that the high court may not use heightened scrutiny when considering whether laws targeting transgender people violate the equal protection provision.

Third, the law nationally is in flux, with conflicting rulings on transgender constitutional rights. The United States Supreme Court has not yet decided whether transgender litigants are a quasi-suspect class triggering heightened scrutiny of legislative enactments affecting them. Neither have we.

While courts have not laid out any precise definition of a quasi-suspect class, transgender people would appear to check all the boxes. They are a discrete minority group. They have historically suffered from discrimination. They are "politically powerless," in the sense that they have been unable "to rely on the legislative process" to protect their rights. (On the contrary: numerous state legislatures have sought to restrict transgender people's rights). The characteristic that makes them different from the cisgender majority is "immutable"—that is, they cannot change their gender identity.

The U.S. Supreme Court has repeatedly held that gender is a quasi-suspect class, so has used "intermediate scrutiny" when considering laws that discriminate on the basis of gender. To survive an intermediate scrutiny analysis, the government must show the law or policy being challenged "is substantially related" to achieving "an important governmental objective."

If a court uses the less demanding "rational basis" standard, the law will be upheld as long as it has "a valid, realistically conceivable purpose" that serves a "legitimate government interest.”

As mentioned above, the Polk County District Court rejected the law at issue in Vasquez, even under a rational basis analysis. Judge Kelly wrote,

There has not been found a reasonable distinction between transgender and nontransgender people relative to their need for Medicaid coverage for medically necessary surgical care. Once the medical community determined that surgery is medically necessary to treat this health issue, the government lost its rational basis to refuse to pay for the surgery. The law appears to draw an arbitrary distinction. So, there is no plausible policy reason advanced by, or rationally related to, excluding transgender people from Medicaid reimbursement for medically necessary procedures.

So even if the Iowa Supreme Court did not use heightened scrutiny in some future case, there's no guarantee justices would uphold an anti-trans law. Nevertheless, decades of federal and state case law suggest that "the outcome of an equal protection case is largely determined by whether the group is designated as a suspect, quasi-suspect, or non-suspect class [...]."

Incidentally, the Iowa Supreme Court applied intermediate scrutiny in the 2009 Varnum decision, which struck down the state ban on same-sex marriage. None of the current justices served on the court at that time.

SIGNS OF INDECISION?

The high court's deliberations are shielded from public view. But it's worth noting that the relatively short, unanimous decision in Vasquez (17 pages) was published more than sixteen weeks after the justices heard oral arguments.

The Iowa Supreme Court has turned around several other recent unanimous decisions more rapidly. The decision in the open records case Belin v Reynolds was published about seven weeks after oral arguments. A case involving environmental groups and the Iowa Utilities Board came out roughly five weeks after oral arguments. The 39-page opinion in LS Power Midcontinent LLC v State, involving constitutional claims, came out four and a half weeks after oral arguments. The court ruled on Story County Wind LLC v Story County Board of Review less than four weeks after oral arguments.

For that matter, the Good decision from 2019, stemming from a policy like the one at the center of Vasquez, was published only about six weeks after the oral arguments.

Other factors could explain the timeline. But it's possible members of the court considered other ways to resolve this case before landing on one approach all seven justices could agree on.