What is Gender Identity Disorder (GID)?  Medline has this description: 

"Gender identity disorder is a conflict between a person's actual physical gender and the one they actually identify him or herself as. For example, a person identified as a boy may actually feel and act like a girl."

Wikipedia lists this diagnostic criteria:

"In the United States, the American Psychiatric Association permits a diagnosis of gender identity disorder if four diagnostic criteria in theDiagnostic and Statistical Manual of Mental Disorders, 4^thEdition, Text-Revised (DSM-IV-TR) are met. These criteria are:

• Strong and persistent cross-gender identification [...]

• Persistent discomfort about one's assigned sex or a sense of inappropriateness in the gender-role of that sex [...]

• The diagnosis is not made if the individual has a concurrent physical intersex condition.

• Clinically significant distress or impairment in social, occupational, or other important areas of functioning.

If the four criteria are met under the DSM-IV-TR, a diagnosis is made under ICD-9 code 302.85. See the classification and external resourcessidebar at right for other diagnostic codes for gender identity disorder.

The International Classification of Diseases (ICD-10) list three diagnostic criteria:

Transsexualism (F64.0) has three criteria:^[3]

1. The desire to live and be accepted as a member of the opposite sex, usually accompanied by the wish to make his or her body as congruent as possible with the preferred sex through surgery and hormone treatment
2. The transsexual identity has been present persistently for at least two years
3. The disorder is not a symptom of another mental disorder or a chromosomal abnormality"

"To most of us, sex-reassignment surgery sounds crazy. Why cut up your body to fit your mind? Can't we persuade your mind to fit your body? The answer, apparently, is no. We may think problems are easier to solve when they're "all in your head," but in this case, the mind is harder to change than the body. The court, citing expert testimony and the judgments of three other high-level courts, found no instance in which psychotherapy alone had effectively treated severe GID.

Furthermore, while GID might begin in your head, it doesn't end there. On this point, the evidence is chilling. "All three expert witnesses agreed that, absent treatment, GID in genetic males is sometimes associated with autocastration, autopenectomy, and suicide," the court noted. Mental illness is physically dangerous for the simplest of reasons: The mind can decide to mutilate the body. So the question isn't whether to cut up the bodies of patients with severe GID. The question is who will do the cutting."

Saletan goes on to state that the courts have decided that medicaid, prison health care, and private insurance must cover sex reassignment surgery.  Saletan doesn't cite a source for this claim, but at the very least it sets the precedent of recognizing GID as a serious and legitimate medical condition and sets the stage for coverage. 

If extreme self- mutilation and suicide are outcomes of untreated GID, clearly these people need and deserve compassionate treatment. Unfortunately this is a tricky issue.  Saletan gives the example of hormone treatment giving a biological man size B cup breasts. In order to pass as a woman, s/he wants D cup breasts.  Should insurance cover augmentation?  If smaller breasts are socially crippling for a biological man with GID, what about a biological woman who is depressed and would be happier with larger breasts?   

Saletan concludes:

"And why stop at chest level? O'Donnabhain also got surgery to feminize her face. The IRS attributed this to her preoccupation with appearance rather than disease. But the Tax Court disagreed. The facial surgery "may have served the same therapeutic purposes as (genital) sex reassignment surgery and hormone therapy; namely, effecting a female appearance in a genetic male," the judges wrote. After all, they reasoned, "passing as female is important to the mental health of a male GID sufferer."

Passing as female, effecting an appearance, feeling comfortable in a social gender role. These are not conventional health care objectives. They're the evolving frontiers of an expanding conception of medical necessity. The tax-deductibility of sex-reassignment surgery is just the latest conquest in this expansion. It won't be the last."

This discussion illuminates the ongoing evolution of gender identity.  It's fascinating to read about this issue.  It's also interesting that many people in the GLBT community seem to embrace labeling it a medical condition.  I read once that back in the bad old days, homosexuality was mislabeled as a mental disorder/medical condition, and homosexuals suffered terribly because of this labeling. Of course in contrast to homosexuality, GID in adults actually does require treatment. Stigmatization can be an inappropriate and unfortunate outcome of diagnosis. 

Here's a pretty good video outlining some of the controversy surrounding labeling GID as a psychiatric condition.  It will be interesting to watch how this shakes out as our culture evolves.