I think that there are two issues here which should be kept distinct.

The first is: Should gender reassignment be considered an 'elective surgery' like boob jobs and face lifts or should it be considered a medical treatment for a psychological / psychiatric disorder (that is in fact listed in the DSM).

The second is: Should prisoners be entitled to the same health benefits as people who aren't prisoners.

I think that there is a way to go on the first issue (so that health insurers regard gender reassignment surgery as psycho-surgery rather than elective surgery) BEFORE we even get to the second issue...