Most often, it is due to medical conditions, if SRS is denied...
Very good point! There are many medical reasons why someone may be denied. One concern I have is that I am seriously overweight. Before I can undergo SRS I'll need to lose a considerable amount of weight because otherwise the anesthesia alone is far too risky.
... replacing the bodies natural hormones with artificial hormones of the opposite sex, is EXTREMELY traumatic to the body.
Yes, another very good point.
Also, the therapy is intended to be a filter, to seperate those who are transexuals, from those with some other disorder, such as bipolarism or split personality, or the person has a fetish.
I know one of the considerations is that they want to make sure the change is not being made for some perceived benefit from being the other sex. The change has to be due to genuine Gender Identity Dysphoria and not because someone thinks they'll gain some sort of life advantage or other boon from changing sex.
Money is another issue, as it does get costly.
One of my transsexual acquaintances currently preparing for surgery told me it's now costing $20,000 for the surgery itself. Add on to that the cost of ongoing hormone therapy, psychotherapy and everything leading up to and following the surgery itself and it gets very expensive. Sometimes medical insurance will cover SRS, but in most cases it doesn't. Hormone therapy is a little easier to cover with insurance though not necessarily easy. Psychotherapy is perhaps the only easily insured expense in the transitioning process. I'm planning to save at least $50,000 over the next few years as I plan to transition. It means I'll be working two jobs (or more depending on how things go) to make this happen.
Another reason some do not get SRS, is the are satisfied with the rest of there body reflecting the appearance of the opposite sex.
Yes, there are non-op transsexuals that are able to successfully live out their lives with convincing gender expression and feel they don't need SRS. Being transsexual does not mandate SRS, but in most cases it is the only treatment (combined with hormone therapy) for Gender Identity Disorder.