WASHINGTON — The Department of Health and Human Services is expected to end Medicare's blanket ban on sex-reassignment surgery at the end of a panel review, according to sources familiar with the process.

Because Medicare guides many insurance industry decisions, eliminating the blanket ban on the procedure could have significant consequences in the private health insurance market for the transgender community, transgender rights advocates say.

Medicare has for decades considered sex-reassignment surgery "experimental," despite opposition from many major medical professional associations and LGBT advocates, who say the ban denies necessary care to transgender people. The private insurance industry has also been slow to adopt coverage options for sex-reassignment surgery and related care, something advocates say stems from the Medicare ban.

That could begin changing in the next couple weeks, as an independent HHS review panel hands down its ruling on a challenge to the Medicare ban filed last year by the ACLU, Gay & Lesbian Advocates & Defenders, and the National Center for Lesbian Rights. Lifting the blanket ban would not necessarily mean Medicare would then cover sex-reassignment surgery, but would make it possible for Medicare officials to consider covering the procedure. The change would allow the government study coverage options just as it does for other medical procedures.

Last year, the three groups filed what's called an "administrative challenge" to the ban with the HHS Departmental Appeals Board, which generally makes final HHS rulings that can then be appealed to federal court. The challenge centered on the case of Denise Mallon, a 73-year-old transgender Army vet whose doctors recommended sex-reassignment surgery as a treatment for gender-identity disorder.

For a year, the challenge has wound its way through the HHS appeals structure. On Feb. 25, the HHS Departmental Appeals Board issued an interim ruling, spurring a 90-day window until the board makes its final ruling on the challenge, or announces an extension of the review period is needed. The interim ruling stated the board had "determined that the new evidence submitted by the aggrieved party 'has the potential to significantly affect' the Board's evaluation" of the ban — or in other words, that the evidence presented suggested the blanket ban would be overturned.

Since 1981, Medicare's ban on sex-reassignment surgery has stood in the way of people like Mallon, who are seeing treatment for a disorder recognized by major medical advocates like the American Medical Association, American Psychiatric Association, and American Psychological Association.

The difference between those groups' official stances on sex-reassignment surgery and Medicare's is stark.

"AMA supports public and private health insurance coverage for treatment of gender identity disorder as recommended by the patient's physician," reads a section from the group's bylaws.

According to a May 2012 statement, the American Psychiatric Association "advocates for removal of barriers to care and supports both public and private health insurance coverage for gender transition treatment."

Medicare's three-decades-old ban reads much differently.

"Because of the lack of well-controlled, long-term studies of the safety and effectiveness of the surgical procedures and attendant therapies for transsexualism, the treatment is considered experimental," reads the existing Medicare language. "Moreover, there is a high rate of serious complications for these surgical procedures. For these reasons, transsexual surgery is not covered."

"Transsexual surgery for sex reassignment of transsexuals is controversial," the current language states.

Advocates closely watching the HHS appeal timeline believe a win is coming, but have been reluctant to say so publicly. The advocacy groups directly behind the Medicare challenge declined to speak on the record about it.

Critics have tried to shut down a re-examination of the ban before. A parallel track administration proposal to review the ban was scrapped last year by HHS leadership after controversy erupted among critics who questioned the need for Medicare funds to cover what was once called "sex change" surgery.

That term is outmoded, say experts, as is the contention that sex-reassignment surgery — which some transgender advocates have begun calling "gender-affirmation surgery" — is experimental and unproven.

"It's helping people be who they really are," said Stephen Forssell, director of the Graduate Program in LGBT Health Policy and Practice at George Washington University. "It's a body that does not match how you identify. We as a society should be helping people do that. I find that medically necessary."

Forssell said Medicare's understanding of sex-reassignment surgery is well behind the current medical understanding of it and current suite of medical capabilities. Transgender patients have been found to enjoy innumerate psychological benefits from sex-reassignment surgery, and it is seen as a much more accepted part of medicine than it was in 1981, he said.

Some private insurance has begun covering sex-reassignment surgeries as well as associated care that comes with it. But many companies are still staying away from the new coverage options, citing cost and other concerns. Though cases are still working their way through the courts, current understanding of the Affordable Care Act is that the insurance reforms in the bill do not force companies to cover gender reassignment.

That's partly why ending the Medicare ban is seen as so important among advocates, as well as increased awareness around other health-related issues the transgender community faces. Companies and insurers often take their coverage cues from what the government pays for with Medicare, so if the government stops calling sex-reassignment surgeries "experimental," company plans could follow.

Even lifting the blanket ban could be a powerful victory for the transgender community, say the advocates, and could create a healthcare legacy for the Obama administration that goes beyond Obamacare.

"Medicare is really the 900-pound gorilla of insurance coverage," Baker said.