document updated 13 years ago, on Dec 19, 2010
Don't Ask, Don't Tell has been repealed. Awesome. Unfortunately, trans and intersex people are still barred from serving in the US armed forces.
DoD Instruction 6130.03 (dated April 2010) lists medical standards for admission to the armed forces, and includes:
e. History of major abnormalities or defects of the genitalia such as change of sex (P64.5) (CPT 55970, 55980), hermaphroditism, pseudohermaphroditism, or pure gonadal dysgenesis (752.7).
The Army's Standards of Medical Fitness says:
3–35. Personality, psychosexual conditions, transsexual, gender identity, exhibitionism, transvestism, voyeurism, other paraphilias, or factitious disorders; disorders of impulse control not elsewhere classified
a. A history of, or current manifestations of, personality disorders, disorders of impulse control not elsewhere
classified, transvestism, voyeurism, other paraphilias, or factitious disorders, psychosexual conditions, transsexual,
gender identity disorder to include major abnormalities or defects of the genitalia such as change of sex or a current
attempt to change sex, hermaphroditism, pseudohermaphroditism, or pure gonadal dysgenesis or dysfunctional residuals
from surgical correction of these conditions render an individual administratively unfit.
b. These conditions render an individual administratively unfit rather than unfit because of physical illness or
medical disability. These conditions will be dealt with through administrative channels, including AR 135–175, AR
135–178, AR 635–200, or AR 600–8–24.
It's couched in medical language, and it's sometimes defended as a way to avoid paying for the medical costs associated with transition. However, many employers include gender identity in their nondiscrimination clause, but their health insurance explicitely doesn't cover anything associated with transition. The two issues are separate. You can say "we'll take you as you are, but any changes you want to make are your own responsibility".
Personally, I think it comes down to not wanting to deal with people cross-dressing in the barracks. The military is a place where people are expected to behave in an extremely masculine manner.
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