Judge Approves Section 504 Settlement Removing 'Most Integrated Setting' Language From Federal Rules
A federal judge has approved an agreement between the U.S. Department of Health and Human Services and five states that removes key community-integration provisions from the 2024 update to regulations implementing Section 504 of the Rehabilitation Act. U.S. District Judge James W. Hendrix approved the agreement late last week between federal officials and Texas, Alaska, Florida, Louisiana and Montana, according to Disability Scoop.
Under the agreement between the states and HHS Secretary Robert F. Kennedy Jr., the Section 504 regulations remain in place, but certain sections will be dropped. They include the provision defining the “most integrated setting” and multiple provisions stating that, in choosing among available methods for meeting the requirements of the section, a recipient “shall give priority to those methods that offer programs and activities to qualified individuals with disabilities in the most integrated setting appropriate.”
The judge's action ends a lawsuit known as Texas v. Kennedy, first filed roughly two years ago by Texas and 16 other states. The states initially sought to ensure that gender dysphoria would not qualify as a disability under the 2024 rule and also asked the court to strike Section 504 entirely, later backing off the latter claim. All but three states dropped out under pressure from disability advocates, though Louisiana and Montana opted to rejoin the litigation. In recent weeks the federal government switched sides, citing a June memo from the Justice Department's Office of Legal Counsel stating that neither the Americans with Disabilities Act nor Section 504 “require states to treat mentally disabled patients in the most integrated setting appropriate to their needs.”
Disability advocates said the deletions do not change the underlying law and noted that, because the regulatory changes came through a settlement agreement, the court did not reach any findings in the case. “The integration mandate doesn't depend on this regulation. It comes from Section 504 itself, from the ADA, and from the Supreme Court's decision in Olmstead v. Lois Curtis. All of those are still in place,” said Michelle Uzeta, executive director at the Disability Rights Education & Defense Fund. She described the outcome as “not a legal loss” but “a surrender,” saying HHS joined the states that sued and asked the judge to strike the protections. Shira Wakschlag, senior executive officer for legal advocacy and general counsel at The Arc of the United States, said the court's order accepting the agreement is “inconsistent with 50 years of law.”
Even with the statute unchanged, advocates and legal experts expect the settlement to create uncertainty about what states, health care providers and other covered entities must do. Eve Hill, a civil rights attorney who served as deputy assistant attorney general for civil rights under the Obama administration, said the agreement “demonstrates that the five state plaintiffs believe they are free to put people with disabilities into institutions,” and warned that some covered entities may conclude they can institutionalize people with disabilities. Disability rights groups say the underlying obligations under Section 504, the ADA and the Olmstead precedent remain enforceable, setting up likely further legal and regulatory battles over community integration.