How To Design State Health Care Funds To Meet the Needs of Transgender Patients

Federal policy changes have created significant uncertainty around access to transgender health care. Reductions in federal funding and new restrictions affecting coverage and providers have shifted greater responsibility to states and municipalities to preserve access to care. Currently, 28 states and Washington, D.C., still mandate coverage of transgender health care in their state Medicaid programs, but federal proposals to prohibit the usage of federal dollars for this care mean that lawmakers need to find new funding solutions.

Because states already play a significant role in financing and administering health care, they can use their existing authority to establish dedicated funding mechanisms to help fill emerging gaps in care. In 2020, California established the nation’s first state-managed health care fund to support transgender health equity. California’s fund illustrates that states can do more to protect access to care for transgender patients and that creating a state fund is both fiscally and administratively feasible.

States without existing LGBTQI+ health care programs should adapt model legislation, described below, to expand financial support for patients and providers. Even in places where a dedicated state fund is not currently possible, community-oriented and mutual aid systems help people access health care that they need. Patients living in states without set-aside funding support can still access community funds for transition-related health care.

Similar to federal programs, state budgets are the final step in funding a program, service, or entity. Legislation passed during the normal session may authorize the creation of a fund but does not appropriate monies. This means that health care funds are not operational until they receive an appropriation. This is done through the budget process. All spending must be included in the finalized budget to be spent. If pressing budget needs arise after a budget has been enacted, lawmakers may pass supplemental appropriations. In 20 states, such as Texas and Oregon, budgets cover two years instead of one.

Simple budget funds can be established through specific legislation or during the budget process as a new appropriation. Simple budget funds are created when lawmakers assign a specific amount of revenue to a new or existing program. Since lawmakers have to reappropriate monies for each budget cycle, the funding level for a simple budget fund may fluctuate. For example, the California fund initially received an appropriation of $13 million in 2021, followed by a $9 million addition in 2024. During the 2025–2026 budget cycle, lawmakers proposed removing $9 million from the fund. In July 2026, Gov. Gavin Newsom (D) pledged an investment of $26 million across various programs to support transgender youth health care access, but the balance of the Two-Spirit, Transgender, Gender Nonconforming, and Intersex (2TGI) Wellness and Equity Fund for this budget cycle remains stable for the upcoming year.

Trust funds can be more financially stable in the long term than simple budget funds because the trust funds roll over year to year and do not return to the state’s general revenue fund. At the federal level, a prime example of a trust fund is the Social Security trust funds. States have used trust funds for decades to maintain steady funding for both short- and long-term needs. Examples include unemployment benefits; education savings accounts; health care programs; and environmental conservation, transportation, and infrastructure improvements.

The relentless attacks on transition-related health care have led more states to find ways to protect access to it. In addition to California’s 2TGI Fund, established in 2020 as the Transgender, Gender Diverse and Intersex (TGI) Wellness and Health Equity Fund, at least two other states, and one city, are working to protect access. In 2025, Massachusetts established “a non-budgeted special revenue fund” to cover health care costs and research for transgender residents. In 2025, New York City appropriated $2.5 million for the 2026 budget to help bridge the gap for transgender health care programs that suffered funding cuts under the Trump administration and an additional $5 million to maintain the 988 mental health hotline for LGBTQIA+ residents. The California fund was expanded in 2025 to explicitly cover two-spirit communities and broaden the scope of services that can be funded. Finally, in January 2026, Vermont legislators took the first step to creating a similar trust fund through H.B. 576.

Each of these cases shows how lawmakers can utilize their budget authority to promote LGBTQI+ health policy. Most importantly, creating a distinct fund or trust fund can isolate monies from federal mandates or spending restrictions. States and localities can use the examples below to determine which model fits their patient population and budgetary needs.

Successful health care funds require thoughtful policy design and effective implementation. Policymakers should consider the following elements when establishing a health care fund.

There are an estimated 2.14 million transgender adults and roughly 724,000 transgender youth in the country. Lawmakers can use population health care data such as the Behavioral Risk Factor Surveillance System or the Youth Risk Behavior Surveillance System to identify the most accurate population size and calculate their specific funding needs. State health departments and insurance regulation agencies can provide additional population information to help lawmakers tailor the scope of proposed funds based on size and current utilization rates.

In all the existing transgender health care funds, lawmakers utilized money from the state’s general fund, which comes from tax revenues. To protect the stability of the fund, policymakers should also consider ways to isolate dedicated funding from other federal and state programs.

From 2021 to 2025, half of all states cut personal or corporate income tax rates. As these states work to manage the fallout from federal funding cuts, they should identify additional tax and revenue areas that won’t impose additional tax burdens on people who rely on the social programs and safety net benefits that are now being decimated. As a result of the One Big Beautiful Bill Act, 40 states and Washington, D.C., must invest in multimillion-dollar work verification systems to comply with Medicaid work requirements. Similar punitive eligibility-testing regulations will also raise costs for states to administer other safety net programs such as the Supplemental Nutrition Assistance Program (SNAP).

The health care funds in California, Massachusetts, and New York City dedicated to transgender health equity are under the purview of departments of health and established in statute sections that govern these departments, with additional provisions to specify the funding levels in budgets. Placing this funding under the direction of qualified public health and/or medical experts could provide an important bulwark against mismanagement and promote spending that goes directly to health care. To avoid delays in disbursements, experienced grant managers should oversee the funds.

Often, governments require agencies to report to the legislature on their spending each year. These requirements, known as “reporting requirements” in legislation, give governments the opportunity to monitor the efficacy and utilization of specific initiatives. For example, when Massachusetts established its Affirming Health Care Trust Fund in 2025, it included a requirement for the Department of Public Health to submit annual reports to three committees.

Crucially, health funds need to be accessible to those who need them the most. Policymakers can set aside as much money as they want, but it will not help anyone who does not know when or how to access it. For the entire duration of the fund, it is also critical to ensure that it is properly isolated from other funds to prevent any administrative barriers to disbursement. Typically, these types of rules are unspecified in legislation and instead left to the agency in charge of funding to establish through the regulatory process.

To encourage the swift and effective use of funds, policymakers can include provisions that specify when regulations need to be completed and what types of activity they need to cover, as well as set spending deadlines to ensure that funds are spent in a timely manner.

If a state intends to use the funds to support existing organizations, rather than directly reimburse patients or providers, it could create clear and comprehensive notices of funding opportunities (NOFOs). In California, for example, the 2TGI Fund is primarily used to distribute grants to nonprofit organizations. To accomplish this, the California 2TGI Fund manages NOFOs and technical assistance at the start of each grant cycle.

If a state intends to use the funds to directly reimburse patients, then greater public education will be needed. Legislators and state officials can work together with health care providers, advocacy groups, and their constituents to build public education campaigns to ensure that news of this funding reaches those who need it most. Given the complexity of state budgets, direct outreach and guidance may be necessary to make constituents aware of the resources available to them.

State-based health care funds are an important, if temporary, solution to the problems caused by current federal health care policy. States have weathered major financial stress and federal spending cuts before, and they have an opportunity to build on existing community efforts to protect access to transgender health care.