The federal government’s posture in Texas v Kennedy—a lawsuit over HHS’s 2024 update to Section 504 of the Rehabilitation Act—has shifted dramatically since June 2026, with the Department of Justice (DOJ) now effectively aligned with 3 states seeking to unwind the rule rather than defending it.
On June 18, 2026, the DOJ’s Office of Legal Counsel issued an opinion concluding that neither Section 504 nor Title II of the Americans with Disabilities Act (ADA) requires states to provide services in the “most integrated setting appropriate,” disputing the legal basis for what disability law calls the integration mandate. The memo does not carry the force of law on its own, but it sets the policy direction HHS and the Department of Justice have followed since.
“Invalidating the Section 504 Final Rule could put people at greater risk of discrimination, unnecessary institutionalization, and loss of the independence, dignity, and opportunity to live fully in their communities,” Lisa Stella, executive director of Lighthouse for the Blind of the Palm Beaches, Treasure Coast & Okeechobee, said in a statement to The American Journal of Managed Care.
Olmstead Guidance Now Deemed “Not Enforceable”
DOJ followed with a Federal Register notice on July 20, 2026, stating it will no longer rely on its 2011 Olmstead guidance—the framework federal courts have used for over a decade to determine when a state violates the ADA by unnecessarily institutionalizing people with disabilities—when enforcing Title II. The notice, issued by the Civil Rights Division, said the guidance and similar documents lack binding legal effect and that the department plans to revisit them in light of the Supreme Court’s 2024 ruling in Loper Bright Enterprises v Raimondo.
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The move does not overturn Olmstead v L.C. (1999), the underlying Supreme Court precedent, or the ADA itself. But it signals reduced federal enforcement appetite for community-integration claims, which underpin access to home- and community-based Medicaid services for people who would otherwise face institutional placement.
This retreat from federal enforcement stands in contrast to the administrative momentum of the last decade, where a consistent legal framework was used to push states toward community integration. The new stance creates a gap in the regulatory structure, leaving existing statutes on the books without the specific operational guidance that defined them for years. States and providers must now handle a legal environment where the “most integrated setting” standard remains formally binding, but the federal tools to enforce it are being actively dismantled.
Parties Drop Out as Litigation Narrows
Texas v Kennedy (formerly Texas v Becerra) began in September 2024, when a coalition of 17 states, including Texas, Alaska, Alabama, Arkansas, Florida, Georgia, Indiana, Iowa, Kansas, Louisiana, Missouri, Montana, Nebraska, South Carolina, South Dakota, Utah, and West Virginia, challenged HHS’s first substantive update to Section 504 regulations in nearly 50 years.
The original suit combined 2 claims: that Section 504 itself is unconstitutional and that the rule’s integration-mandate provisions exceeded HHS’s authority. All 17 states remained parties to the case, with no withdrawals, when they dropped the constitutional claim in April 2025 following advocacy pushback, narrowing the litigation to the integration-mandate dispute.
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A separate, parallel HHS rulemaking reshaped the suit in 2 stages. In December 2025, HHS proposed a rule, announced by Secretary Robert F. Kennedy Jr, to exclude gender dysphoria not resulting from a physical impairment from Section 504’s definition of disability. Eight of the original 17 states dropped their claims once HHS moved to address the gender dysphoria language through that separate rulemaking, narrowing the case to 9 states—Texas, Alaska, Florida, Indiana, Kansas, Louisiana, Missouri, Montana, and South Dakota—who filed an amended complaint in January 2026 focused on the integration mandate.
Four of those 9—Indiana, Kansas, South Dakota, and Missouri—withdrew individually between May and July 2026, a second wave that advocacy organizations, including The Arc and Disability Belongs, credit substantially to sustained state-level campaigns pressuring each state’s attorney general. Indiana Attorney General Todd Rokita, however, attributed his state’s withdrawal to a different cause, saying the gender dysphoria dispute had already been resolved and that “with that core victory secured, we have dismissed our claims.”
As of late July 2026, Florida is 1 of 3 states still party to the suit, along with Alaska and Texas.
Spillover Into Active Olmstead Litigation
The administration’s shift has already reached litigation beyond the Section 504 rule itself. In United States v Florida, the Eleventh Circuit ruled in March 2026 that the federal government could pursue systemic ADA relief for Medicaid-enrolled children at risk of institutionalization, not just those who individually filed complaints—a decision that aligned with 6 other circuits’ treatment of “at-risk” Olmstead claims.
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Florida petitioned for further review in May 2026. On August 13, the DOJ itself asked the appellate court to vacate that win and send the case back to the district court, citing its changed legal position on the scope of the integration mandate.
Implications for Medicaid and Managed Care
For managed care organizations and Medicaid home- and community-based services (HCBS) providers, the practical stakes center on enforcement risk rather than an immediate change in underlying law. Section 504, the ADA, and Olmstead remain in effect regardless of DOJ’s guidance posture. But reduced federal enforcement, combined with a pending court ruling on HHS’s own regulatory authority, creates uncertainty for states and payers currently structuring HCBS waiver programs, discharge planning, and medical necessity determinations around the integration mandate’s “most integrated setting” standard.
What Comes Next
HHS’s response to the states’ summary judgment motion is due August 31, 2026. The Disability Rights Education and Defense Fund has said it anticipates the parties will request a stay while HHS considers how the June Office of Legal Counsel memo affects its position in the case. However, the organization cautions it isn’t certain how the litigation will proceed from here. A ruling on the merits could come before the end of 2026.
