I think this was originally because government health care systems made diagnosis and surgery too difficult. It's well known that governments set up smoke-and-mirrors operations to avoid having to tackle difficult issues. If they can sell the line of "Self-ID is what U NEED", so they can shuffle off the time and expense of setting up a convenient system of diagnosis and surgery, then they'll do whatever propaganda manipulations that entails.
It's not the governments pushing this. It's the transactivist organizations pushing it. Governments are just going along with it.
Additionally, the rigor of diagnosis hasn't really been in place for a while. Look into the Tavistock clinic in UK, and particularly the case of Keira Bell and the results of the investigation that resulted from her case. The short version is that Tavistock has been "diagnosing" minors with gender dysphoria after only a few hours of discussion, and immediately moving to prescribe them puberty blockers and/or cross-sex hormones.
For many people, myself included, this is medical malpractice. For transgender activists, the fact that they're engaging in any sort of diagnosis at all, rather than just providing puberty blockers and cross-sex hormones on request is a travesty.
Collin, you seem like a great person, and once past that first day of breaking in to a new forum, you seem very reasonable.

I'm glad you're engaging in this thread. It also seems like you're working from a set of assumptions that aren't as true as you think they are. That's okay - that's where I was about two years ago too. There is a LOT going on behind the scenes, hidden from view, that is completely counter to what the general well-meaning public thinks the whole thing is about.
Despite the framing of it as such, this discussion isn't fueled by hatred or fear of transgender people. It's almost entirely two topics. 1) The conflict between the sex-based rights of females and the gender-based rights of transwomen, and 2) Self-ID and a lack of physical transition.