From a Washington Post profile of trans servicemen and women:
More than two years after the repeal of the law that barred gay men and lesbians from serving in the military openly, transgender service members can still be dismissed from the force without question, the result of a decades-old policy that dates back to an era when gender nonconformity was widely seen as a mental illness…. Transgender service members are increasingly undergoing procedures to align their bodies more closely with the genders with which they identify. Medical experts, meanwhile, are urging the Defense Department to rescind a policy they view as discriminatory and outdated, noting that some of America’s closest allies, including Canada, Britain and Australia, have done so seamlessly.