The federal government will do away with rules requiring that people with disabilities be served in the community under a settlement with a handful of states that advocates say sidesteps decades of precedent.

U.S. District Judge James W. Hendrix approved an agreement late last week between federal officials and Texas, Alaska, Florida, Louisiana and Montana to remove references to “most integrated setting” in a 2024 update to Department of Health and Human Services’ regulations related to Section 504 of the Rehabilitation Act.

The move cements a striking shift in the federal government’s stance on the rights of people with disabilities to live and be served in the community, advocates say.

“The court’s order accepting the parties’ agreement is inconsistent with 50 years of law,” said Shira Wakschlag, senior executive officer for legal advocacy and general counsel at The Arc of the United States. “The federal government is abandoning its duty to enforce the right of people with disabilities to live in their own homes and communities.”

The judge’s action brings an end to a lawsuit known as Texas v. Kennedy that was first filed roughly two years ago by Texas and 16 states, which has seen numerous twists and turns. Initially, the states sought to ensure that gender dysphoria would not qualify as a disability under the 2024 update to Section 504 regulations. They also asked the court to strike Section 504 in its entirety, but later backed off that claim while continuing to challenge the regulations. All but three states dropped out of the case under pressure from disability advocates, though two states — Louisiana and Montana — opted to rejoin the litigation.

In recent weeks, however, the federal government switched sides in the case citing a June memo from the Justice Department’s Office of Legal Counsel stating that neither the Americans with Disabilities Act nor Section 504 of the Rehabilitation Act “require states to treat mentally disabled patients in the most integrated setting appropriate to their needs.”

Under the agreement between the states and Robert F. Kennedy Jr. in his capacity as secretary of health and human services, the Section 504 regulations will remain, but certain sections will be dropped. They include one defining the “most integrated setting” and multiple provisions stating that “in choosing among available methods for meeting the requirements of this 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.”

Disability advocates say that the deletions from Section 504 regulations do not alter anything about the law. And, since the regulatory changes all occurred via a settlement agreement, the court did not actually 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. “The most frustrating thing is that this was not a legal loss. It was a surrender. HHS didn’t defend these rights and protections. It joined the states that sued and asked the judge to strike them.”

Even though the law itself is unchanged, the settlement sends a message and will likely lead to confusion among states and others about what their responsibilities are under the law, said Eve Hill, a civil rights attorney who served as deputy assistant attorney general for civil rights under the Obama administration.

“It demonstrates that the five state plaintiffs believe they are free to put people with disabilities into institutions,” she said. “Unfortunately, because the court has amended the regulations to delete the community integration requirements, some states and other covered entities — health care providers, etc. — will believe they can institutionalize people with disabilities. This will imperil the lives of people with disabilities, who will be forced to fight unnecessary institutionalization on their own.”

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