Gender-Affirming Care Linked to Reduced Mental Health Service Use, Significant Cost Savings for Healthcare Systems
New research reveals a compelling link: gender-affirming medical care is associated with a reduction in mental health service utilization among transgender and gender-diverse individuals, potentially leading to significant cost savings for healthcare systems. Two studies, leveraging de-identified Medicare records, tracked mental health service and prescription use among thousands of individuals before and after initiating gender-affirming treatments, consistently finding decreased service use and associated government expenditure.
This research suggests that investing in gender-affirming care could lead to substantial long-term financial benefits for national healthcare systems.
Background on Gender-Affirming Care and Mental Health
Transgender and gender-diverse individuals frequently report higher rates of mental health concerns and utilize mental health services more often compared to the general population. A primary contributing factor is gender dysphoria, defined as the distress an individual experiences related to their gender identity, body, or societal perception of their gender.
Gender-affirming medical care, which encompasses hormone therapy and surgical procedures, aims to align an individual's physical characteristics with their gender identity. While not all transgender individuals seek this care, national survey data suggests that approximately 72% desire access at some point. Studies consistently indicate remarkably low regret rates, typically less than 1%, for gender-affirming procedures, and this care has been robustly shown to improve mental health outcomes.
Currently, gender-affirming surgeries are not consistently subsidized under Medicare, often resulting in significant out-of-pocket expenses that can range from $20,000 to $100,000. In contrast, hormone therapy is listed on the Pharmaceutical Benefits Scheme (PBS), with government spending per person typically between $79 and $278 annually. The government is actively considering adding certain gender-affirming surgeries to Medicare. However, some jurisdictions have recently restricted access to hormone therapy for transgender individuals under 18.
Research Methodology
Researchers conducted an extensive analysis of de-identified Medicare records covering the period from 2012 to 2024. The studies included several large cohorts of transgender individuals aged 15 and older who had initiated gender-affirming care:
- 20,358 individuals who started estrogen-based hormone therapy.
- 11,883 individuals who started testosterone-based hormone therapy.
- 2,872 adults who underwent chest surgery.
- 826 adults who underwent genital reconfiguration surgery.
Crucially, data adjustments were made to account for potential confounding factors, such as age and socioeconomic background, ensuring the robustness of the findings.
Key Findings on Mental Health Service Use
The research observed significant and consistent changes in mental health service and prescription use after individuals began gender-affirming care:
- Prior to care: Transgender individuals utilized mental health services, such as psychologist visits or GP mental health plans, at a rate between 1.6 and 3.6 times per year. This rate is substantially higher than the average Australian, who uses one service approximately every two years.
- Post-hormone therapy: Five years after initiating hormone therapy, individuals in the study utilized between 0.3 and 2.6 fewer mental health services annually.
Financial Impact and Potential Savings
The studies identified a clear reduction in government spending on mental healthcare following gender-affirming treatments:
- Hormone Therapy: For individuals initiating hormone therapy, estimated government savings on mental health services ranged from $30 to $260 per person per year.
- Chest Surgery: Following chest surgery, government spending on mental healthcare decreased by an average of $1,769 per person over a five-year period.
- Genital Surgery: After genital reconfiguration surgery, the average mental healthcare saving per person was $3,416 over five years.
Policy Considerations and Estimated Medicare Savings
The research strongly suggests that if gender-affirming surgeries were added to Medicare, the initial costs of proposed rebates could be offset by reduced government spending on mental healthcare within 4 to 5 years. Proposed rebates are $1,328 for chest surgery and $1,195 for genital reconfiguration surgery.
Based on conservative estimates of demand among current hormone therapy recipients, calculations project substantial potential Medicare savings:
- If 89% of the 11,883 transgender individuals currently receiving hormone therapy were to receive chest surgery, the estimated rebate cost would be $14 million. After accounting for $18.7 million in mental health savings over five years for this group, a net Medicare saving of $4.6 million is projected.
- If 82% of the 20,358 transgender individuals were to receive genital reconfiguration surgery, the estimated rebate cost would be $19.9 million. After accounting for $57 million in mental health savings over five years for this group, a net Medicare saving of approximately $37 million is projected.
These projections indicate a combined total of nearly $42 million in Medicare savings within five years, in addition to the demonstrated cost-effectiveness of hormone therapy, which in some cases fully offset mental healthcare expenses and in others generated additional savings.