The Oregon Court of Appeals recently ruled in favor of the Department of Human Services (ODHS) regarding Medicaid rules that affect adults with developmental disabilities. The court's decision, filed on July 15, 2026, confirms that certain rules limiting eligibility for community living supports (CLS) are valid. This ruling impacts how individuals with disabilities can receive support services in their chosen living environments.
The case, Specialty Family Homes LLC v. Department of Human Services (Docket A183802), arose from a challenge by Specialty Family Homes and Joan Schrader, who argued that the rules imposed unfair restrictions on where individuals with developmental disabilities can live and who can provide their care. The court's ruling is significant as it clarifies the boundaries of Medicaid eligibility for community living supports in Oregon.
Background
The petitioners, Specialty Family Homes LLC and Joan Schrader, are service providers for adults with developmental disabilities. They challenged two specific rules: OAR 411-450-0060(6) and OAR 411-450-0020(34) and (35). These rules state that individuals are ineligible for CLS if they live in a dwelling owned or rented by their service provider, unless that provider is a family member.
The petitioners argued that these rules exceeded the statutory authority of ODHS and violated constitutional anti-discrimination provisions. They claimed that the rules significantly limit the freedom of individuals with disabilities to choose their living arrangements and service providers. The case was brought to the Court of Appeals after the petitioners sought to validate their claims, asserting that the rules were unfair and discriminatory.
The Ruling
The Oregon Court of Appeals, led by Judge Joyce, ruled that the challenged rules are valid and do not exceed the statutory authority of ODHS. The court stated, "We conclude that the rules are valid" and emphasized that the rules are rationally related to the legitimate government interest of protecting the health and safety of individuals with disabilities receiving services.
The court's decision was based on a thorough examination of the statutory framework governing Medicaid services in Oregon. The judges determined that the rules do not conflict with state or federal laws, and they are consistent with ODHS's responsibility to regulate living settings for individuals with developmental disabilities. The court found that the regulations are necessary to ensure that individuals receive services in safe and appropriate environments.
Impact
This ruling has significant implications for individuals with developmental disabilities in Oregon. It reinforces the authority of ODHS to regulate the eligibility for community living supports, ensuring that individuals receive care in licensed settings. By upholding the rules, the court has clarified that individuals living in provider-owned or -rented dwellings will not qualify for CLS unless those settings are licensed as adult foster homes.
The decision may affect many individuals who currently rely on community living supports, as they may need to reconsider their living arrangements if they reside in provider-owned settings. The ruling also sets a precedent for how similar cases may be handled in the future, potentially influencing the regulatory landscape for Medicaid services in Oregon.
What's Next
While the court's ruling is final, it is possible that the petitioners may seek further legal recourse. However, details were not available in the court filing regarding any plans for appeal or related cases. The outcome of this case will likely continue to shape discussions about the rights of individuals with developmental disabilities and the regulations governing their care.