DOJ says Section 504 and the ADA impose no integration mandate on states. The shift reaches HCBS waivers, autism services, and settlements that built community mental health.
Key Takeaways
- The federal position has reversed: The Office of Legal Counsel found no integration mandate in Section 504 or Title II in June. On September 23, a court vacated the integration provisions of HHS’s Section 504 rules at the agency’s request.
- Settlement oversight is ending: Federal judges released Georgia from its 2010 agreement’s behavioral health provisions in February and ended North Carolina’s 2012 community living settlement in September.
- The money already favors community settings: Home and community-based services drew 63.8 percent of Medicaid long-term services and supports spending in 2023, or $145.9 billion.
- States and courts carry more of the weight: Olmstead remains binding precedent, and eighteen Governors have asked the Justice Department to keep its commitment to community integration.
Programs that take federal money have long been told to serve people with disabilities in the most integrated setting appropriate to their needs. Some version of that instruction has appeared in federal disability regulations since the Section 504 rules of the late 1970s.
On September 23, U.S. District Judge James Wesley Hendrix in Lubbock, Texas, entered a final judgment vacating that instruction from the Department of Health and Human Services’ 2024 Section 504 regulations, along with the rule’s integration section, its definition of “most integrated setting,” and several related sentences. HHS asked for the outcome. The judgment resolved Texas v. Kennedy, which a coalition of states brought in 2024; the five that remained as plaintiffs, Texas, Alaska, Louisiana, Montana, and Florida, filed a joint motion with HHS at the start of September. In that motion the Justice Department, representing HHS, maintained that courts lack authority to vacate rules for everyone but agreed not to press the point in this case, and the vacatur applies nationwide.
Olmstead v. L.C. stays in place. That 1999 decision found unjustified segregation of people with disabilities to be discrimination under Title II of the Americans with Disabilities Act, and nothing in the Lubbock order disturbs it. Congress has not touched the statutes, and the Justice Department’s own Title II integration regulation was not at issue in the Texas case. What came out were HHS’s provisions, one of the federal government’s working instruments for enforcing community integration across the programs HHS funds, state Medicaid agencies among them.
Three Federal Moves Against the Olmstead Integration Mandate, June to September
The judgment capped a sequence that began in June. On June 18, the Justice Department’s Office of Legal Counsel issued a memorandum opinion for the Counsel to the President concluding that neither Section 504 nor Title II imposed an integration mandate on states in their treatment of people with mental disabilities, and that neither statute authorized federal agencies to impose one. In its reading, Olmstead had left that question open, and it advised agencies to rescind integration-mandate regulations. It also argued that reading either statute to require such a mandate would raise serious constitutional questions about the reach of Congress’s power over the states, while acknowledging that, consistent with Olmstead’s core holding, choosing institutional care for a patient can still be unjustified and discriminatory when no legitimate, nondiscriminatory factors support it.
On July 20, the department published a Federal Register notice stating that its 2011 Olmstead guidance is not enforceable and that it would not rely on the guidance in enforcing Title II. Numerous courts had treated the guidance as authoritative, the notice acknowledged, and the department said it would revisit it in light of the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo. Six weeks later, the joint motion in Texas followed.
The consequences reach well beyond psychiatric hospitals. Lois Curtis and Elaine Wilson, the plaintiffs in Olmstead, were Georgia women with mental illness and developmental disabilities who remained in a state psychiatric unit for years after their treating professionals said they were ready for community programs. Their case affirmed a principle that now shapes how states finance services for adults with serious mental illness, people with intellectual and developmental disabilities, and autistic children and adults served through Medicaid waivers.
Olmstead Settlements That Built Community Mental Health Are Closing
Negotiated settlements were the most visible federal Olmstead tools, and several have now closed. On February 11, months before the Office of Legal Counsel opinion, U.S. District Judge Eleanor L. Ross terminated the remaining behavioral health provisions of Georgia’s 2010 settlement with the Justice Department, releasing the state from roughly 60 provisions and the monitoring attached to them. In their place, the state committed to supportive housing for 541 people under a transition plan, and when the parties requested the release in January, the state said the Governor’s fiscal 2027 budget proposal included $9.3 million for 404 new housing vouchers toward that commitment. The agreement’s provisions covering intellectual and developmental disabilities remain in force, and the state has said it is working toward release from those as well.
North Carolina’s oversight ended next. The Justice Department and the state filed a joint motion on September 11 to end oversight of the 2012 Transitions to Community Living settlement, citing substantial compliance, and a federal judge granted it on September 14. The settlement’s obligations had previously been extended to July 2027. According to the state’s health department, the program has placed more than 4,150 people in community-integrated housing and diverted more than 6,700 from adult care homes. Health and Human Services Secretary Dev Sangvai said the state’s commitment to community living is not contingent on a settlement agreement.
For providers, these agreements have worked something like demand guarantees. A settlement that specifies supported housing slots, assertive community treatment teams, or crisis capacity turns a civil rights obligation into a budget line with a monitor attached. After the monitor leaves, those services continue as long as state appropriations and Medicaid contracts carry them. Supportive housing, a core remedy in both states, also depends on Medicaid and housing financing that is itself in flux, including the federal framework for social-needs waivers that Acuity has reported was rescinded ahead of a wave of renewals.
HCBS Spending and Autism Services After the Integration Mandate Ruling
Community services rest on a financial base assembled over decades. In 2023, 87.1 percent of people using Medicaid long-term services and supports received home and community-based services, which accounted for 63.8 percent of spending, or $145.9 billion, against $82.7 billion for institutional care, according to a 2023 rebalancing brief Mathematica prepared for CMS. Community services first passed half of Medicaid long-term services spending in 2013, after starting at 1.1 percent in 1981. Mathematica also broke out the populations most relevant to Acuity’s readers. Among people with autism, intellectual disabilities, or developmental disabilities, 94.7 percent of long-term services users received community-based care, which drew 82.2 percent of that group’s spending, while among people with mental health conditions or substance use disorders the comparable figures were 82.6 percent and 54.4 percent. Of the five subpopulations the brief tracks, only older adults had a lower community share of spending.
Children and young adults make up a substantial share of that population. People ages 0 to 20 accounted for 28.6 percent of Medicaid long-term services users in 2022, and the most common institutional service in that age group was mental health facility care, according to a separate CMS brief. Those figures place a meaningful part of the integration question inside pediatric behavioral health and developmental services.
Autism services sit inside that structure differently from state to state. Some states pay for applied behavior analysis through developmental disability waivers as well as the Medicaid state plan. In Missouri, as Acuity has reported, the waivers pay certain ABA codes at higher rates than the state plan and require no prior authorization. Autistic adults and people with intellectual disabilities also rely on waiver-funded residential and day services staffed by direct support professionals, a workforce Acuity has found is losing workers faster than providers can replace them.
None of that spending depends on the regulation the Texas court vacated. HCBS waivers rest on the Medicaid statute and on state choices, and Olmstead still binds the lower courts, though the circuits read it differently. In March, the Eleventh Circuit affirmed the liability findings in United States v. Florida and held that a serious risk of institutionalization can amount to discrimination under Title II, while the Fifth Circuit, which covers Texas, reached the opposite conclusion in a 2023 case involving Mississippi. The states in the Texas case had targeted the 2024 rule’s reliance on that same at-risk theory. State interpretations of the federal home and community-based settings rule, which autism providers raised with lawmakers during CASP’s 2026 fly-in, will now be worked out with less federal guidance in the background.
Governors and Facility-Care Advocates Weigh In on the Olmstead Reversal
On September 3, eighteen Governors, led by New York’s Kathy Hochul, wrote to Attorney General Todd Blanche opposing federal actions that would weaken protections against unnecessary segregation. Its signers noted that the movement toward community-based services had advanced under administrations of both parties, and the letter offered to work with the administration and Congress on community systems while preserving individual choice.
Not every stakeholder group opposed the shift. VOR, which advocates for families of people with intellectual and developmental disabilities who use facility-based care, said in a published statement that parts of the opinion align with positions it has held for decades on choice of setting. That statement also warned that the opinion weakens the legal floor protecting people from unwanted or unjustified institutionalization.
With federal monitors stepping back, the durability of community capacity rests on the next round of state budgets and on whether private plaintiffs and state protection and advocacy agencies pursue claims the Justice Department has set aside. Georgia’s developmental disability provisions remain under federal oversight for now, and the Justice Department has not said what will replace the Olmstead guidance it plans to revisit.
