Many of the recommendations contained in this report are predicated on the availability of effective mental health services in the community.  Police, judges, jailers, community corrections officials, and others who refer a person with mental illness to community-based mental health services expect the delivery of certain services and outcomes. A well-functioning mental health system will reduce the number of people with mental illness who come into contact with the criminal justice system. Policy statements and recommendations in this chapter are intended to point the way toward an effective mental health service system.

Mental health systems in many states across the country have undertaken examinations of the services they offer, their funding mechanisms, and the administrative systems needed to manage them effectively. Systems have looked at overarching issues such as the legislative mandate for the state to provide services or the population to be targeted for these services. They have also looked at the details of reimbursement and relationships with other functions within state government. Legislative commissions have put some state systems under the microscope of examination and in at least one state, California, a state-funded independent oversight agency has recently studied the quality and availability of mental health services. [1]

It would not be surprising if different states taking different approaches came up with highly varied recommendations for improvements to the mental health system. However, as much as details may vary, there is remarkable consistency in elements recommended by state commissions and those described by the U.S. Surgeon General's 1999 report on mental health. [2] For a comprehensive examination of the way mental health services are provided in this country, the Surgeon General's report is the single best resource available. State policymakers considering improvements in their state-based systems should make themselves familiar with the contents of the report and consider adapting many of its recommendations to fit the needs uncovered by their efforts.

It is at the community level, however, that mental health services are delivered, and it is there that policies prove to be effective or not. Policymakers and partners seeking change in community responses must be aware of the structure of the community mental health system in the towns and cities where they live. They should focus not just on what exists, but most intently on what a community mental health system could look like if all pieces were in place.  Mental health experts in this country know what works and what doesn't. They agree for the most part on services that should be available in community mental health systems. Yet, for a variety of reasons, our public mental health system has been unable to implement much of what we know. The following policy statements argue for and enumerate practices and approaches shown to be effective.

"The organization of services for adults with severe mental disorders is the linchpin of effective treatment. Since many mental disorders are best treated by a constellation of medical and psychosocial services, it is not just the services in isolation, but the delivery system as a whole, that dictates the outcome of treatment." Mental Health: A Report of the Surgeon General, p. 285

Finally, it is important to consider the role played by funding in determining the scope and depth of the public mental health system. While this report does not provide sufficient analysis to develop recommendations specific to funding issues, readers must bear in mind the funding ramifications inherent in many of the steps recommended herein.

At a minimum, it is important for those who use this report to consider three funding issues as they contemplate implementation of its recommendations. First, are there sufficient funds available to the system for it to meet the expectations of its various constituents? Second, are funds allocated appropriately to ensure the system's priorities are met? And third, is there a mechanism to determine whether allocated funds are achieving the outcomes appropriators think they are purchasing?

As funding for public mental health services has evolved, it has become an extremely complex system.  Each funding stream brings with it conditions and constraints that determine for whom and for what services it can be used.

Readers of this report and virtually everything written on this nation's public mental health system understand that funding for services involves an exceptionally complicated mix of local, state, and federal monies. To provide the full spectrum of services envisioned in this report, a local provider agency must weave together funds derived from sources that may have different guidelines, fiscal years, and stated purposes. Some funding comes to agencies on a per capita basis, some on a "fee for service" or reimbursement basis. Some services are paid for regardless of who accesses them, while most require clients to qualify for programs by demonstrated poverty or disability.

Local support  -  In many communities, local tax levies provide a source of operating support for community mental health agencies. Levels of community support can vary widely. Many agencies serve several towns and therefore may draw support from each of them. It is not at all unknown, however, for one town to provide substantial support, while its neighbor contributes meagerly to the agency.

County support  -  A number of states have developed mental health systems that are financed and managed at the county level. In many of these states, this has been a conscious process of devolution. Again, there is considerable variation among states that have developed county-based systems. Typically, state general funds are provided to counties in block grants based on formulas that may include population, anticipated need, and historic contribution. As with federal block grants to states, however, the idea is to promote local control.

State support  -  State general revenue funds are traditionally the largest funding source for mental health services. For a variety of reasons, however, the share of state funds has been falling for close to a decade, whether measured as the percentage of state budgets or as the portion of the total mental health budget in a given state. At the same time, the amount of state funding needed to provide the required "match" for federal Medicaid funds has continued to rise, as states have increased their reliance on Medicaid for many services. In a typical state, for example, general revenue funds for mental health services may have made up approximately 32 percent of the overall public mental health budget in 1996. By 2001, that portion had decreased to 19.5 percent. By contrast, the state Medicaid match had risen from 20 percent to 29 percent of the overall budget over the same period.

Federal support  -  Each state receives a share of the Mental Health Block Grant, which is administered through the Center for Mental Health Services within the Substance Abuse and Mental Health Services Administration. These Block Grant funds typically comprise approximately 1.5 percent to 3 percent of a state mental health system's budget. States also receive Substance Abuse Block Grants, which make up a higher proportion of the budget for substance abuse services. Even in systems where mental health and substance abuse services are administered together, however, the two Block Grant programs are subject to rules that prevent their blending.

Federal entitlement programs provide the largest sources of funds for the public mental health system. As already noted, the program that has the largest impact on the system is Medicaid. To be eligible for Medicaid, most adults with mental illness must qualify for Supplemental Security Income (SSI).

Medicaid funding poses a great problem for states. While the federal program does provide funding for some services used by people with mental illness, it also comes with many restrictions. To begin with, many people who need public mental health services do not qualify for Medicaid, which was created to address the medical needs of needy and disabled persons. Secondly, only certain services are eligible for Medicaid reimbursement. Since these are services based on medical needs, many state Medicaid authorities do not allow reimbursement for important rehabilitative services required by people with mental illness. Thirdly, Medicaid has never allowed for hospitalization of adults aged 21 to 64 in large psychiatric institutions, although it pays for costs in institutions used by people with developmental disabilities, for example. With fewer people than ever in institutions, this exclusion for "institutions for mental diseases"  -  IMDs  -  may not seem to be a great problem. However, Medicaid pays out large amounts for services to developmentally disabled people receiving services in the community, on the theory that the community services are preventing more costly institution-based services. Mental health services do not qualify for such "waivers" since there are no savings to be realized by diverting adults with mental illness from noncovered institutional care.

Support also comes through programs administered by other agencies in the federal government. Housing programs, for example, are funded through the Department of Housing and Urban Development (HUD), vocational rehabilitation programs are administered by the Department of Education, and so forth. In addition, qualifying veterans receive mental health services through programs operated by the Veterans Health Administration of the Department of Veterans Affairs. In most states, these programs are operated independently of the state-administered public mental health system. It is often the case that if an individual receives services through a VA program, he or she may not be deemed eligible for non-VA services.