Funding surgery and hormones for trans people can save Medicare millions: new research

Transgender and gender-diverse (“trans”) people have worse mental health compared to the general population. As a result, they’re more likely to use mental health services, such as psychologists and counsellors, and treatments such as antidepressants and anxiety medication.

While there are many contributing factors, including stigma, we know gender dysphoria can play a major role. Gender dysphoria refers to the distress or discomfort some trans people feel about their gender, body, or how others perceive their gender.

Gender-affirming medical care – which may involve hormone therapy or surgery – helps align trans people’s bodies with their gender identity. And evidence shows it can drastically improve trans people’s mental health.

But until now, we haven’t had research that tracks whether this means they actually use mental health services and scripts less.

Our two new studies – one on hormone therapy and one on surgeries – looked at what happens before and after people access gender-affirming medical care.

For the first time, we’ve shown that gender-affirming care dramatically reduces how much people access mental health care – saving Medicare millions.

First, what is gender-affirming medical care?

Trans people may seek out different types and degrees of gender-affirming care.

This can include:

• procedures such as a mastectomy or breast surgery, to masculinise or feminise the appearance of the chest (sometimes known as “top surgery”)

• genital reconstructive surgery (sometimes called “bottom surgery”)

• hormonal treatments, including testosterone and estrogen-based medications.

Not every trans person wants gender-affirming care, but most do. National survey data suggests around 72% want to access it at some point in their lives.

One 2021 study surveyed 928 trans people, including trans men, trans women and non-binary people. It found 89% of those assigned female at birth had or wanted to have chest surgery, and 82% of those assigned male at birth had or wanted to have genital reconfiguration surgery.

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%).

How do people currently pay for it?

Gender-affirming surgeries aren’t consistently subsidised under Medicare, meaning people who pay for this medical care themselves can incur between $20,000 and $100,000 out-of-pocket.

But the government is considering adding these surgeries to Medicare. This would mean a rebate for certain procedures, although the patient would cover the gap, which could still be many thousands of dollars.

Hormone therapy is listed on the Pharmaceutical Benefits Scheme, meaning patients pay a small co-payment to fill their scripts. Costs vary significantly depending on individuals’ dosages and goals, but the government spends between $79–$278 per person each year.

However, some jurisdictions have recently blocked access to this kind of medical care. Last year, the Northern Territory and Queensland banned hormone therapy for trans people aged under 18, including testosterone, estrogen and puberty blockers.

What we looked at

We know gender-affirming care improves trans people’s quality of life and reduces psychological distress, dysphoria and suicidal thoughts.

So we wanted to see if this would translate to a drop in trans people using mental health care.

We used de-identified Medicare records over a decade (2012–2024) to track how using mental health services and scripts changed for:

• 20,358 trans people (15 years and older) who started estrogen-based hormone therapy
• 11,883 trans people (15 years and older) who started testosterone-based hormone therapy
• 2,872 trans adults who had chest surgery
• 826 trans adults who had genital reconfiguration surgery.

We also adjusted the data for “confounding factors” – differences which could distort results – such as age and socioeconomic background.

What we found

Our data showed that before starting hormone therapy or undergoing surgery, trans people used between 1.6 and 3.6 mental health services (such as psychologist visits or GP mental health plans) each year.

In comparison, the average Australian uses one service every two years. So trans people who sought these types of services used them 3.2–7 times more than average.

But five years after starting hormone therapy, trans people in our data used between 0.3 and 2.6 fewer health services.

If we translate this into reduced psychologist visits using the standard $100 rebate, it means each year, the government spent $30–260 less per person after they started hormones.

In our study on surgery, we were able to look at exact Medicare costs for services and scripts.

When someone had chest surgery, we found the government spent $1,769 less on their mental health care (on average) over the following five years.

For genital surgery, the average mental health care saving per person was $3,416 over the following five years.

What this means

If gender-affirming surgeries are added to Medicare, the average proposed rebates would be $1,328 for chest surgery and $1,195 for genital reconfiguration surgery.

Our findings suggest these one-off costs would be be eclipsed by the reduced government spending on mental health care within 4–5 years.

It’s difficult to know how many Australians are actually trans, as we don’t yet have census data on this.

And we don’t know exactly how many people would access surgeries if they were added to Medicare. But the research mentioned above from 2021 suggests between eight and nine in every ten trans people want or have already had top or bottom surgery.

So we applied those rates to estimate demand for surgery in the sample we observed who were currently on hormone therapy, given people usually take hormones before surgery. Still, this is a conservative estimate.

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.

The cost for 82% of 20,358 trans people to get bottom surgery (with a $1,195 rebate per person) would be $19.9 million. Once we subtract the mental health savings over five years for this group ($57 million) Medicare would save about $37 million over five years.

This would lead to a total of almost $42 million in savings within five years.

However given the significant unmet need for gender-affirming care this number is likely to be much higher.

Hormone therapy is similarly cost effective. In some cases it offsets the money spent in mental health care and in others it leads to savings.

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.