As Economy Takes Toll, Mental Health Budgets Shrink

By: - July 19, 2010 12:00 am

Photo courtesy Mississippi State Hospital

Mississippi State Hospital, founded in 1855, has always been the state’s central psychiatric treatment facility. The hospital has closed 184 beds over the past three years. In the 1950s, more than 500,000 patients resided in state-run psychiatric hospitals. Today, the number is 50,000.

Mental health policies in America have changed radically over the past 60 years. A one-time emphasis on caring for patients in large institutions has shifted to treating them in outpatient settings in the community. The ways mental disorders are diagnosed and categorized have changed. And the use of psychotropic medications is more prevalent than it used to be.

But throughout the decades, one thing has remained the same. States have taken the lead role in publicly funded care for the mentally ill, and paid the majority of the expenses. Even through recessions, the states have steadily increased their mental health budgets every year to meet increasing demand.

Now, as states face their biggest fiscal challenge in modern history, the trend has reversed. For the first time in more than three decades, mental health funding is declining. The drop-off is translating into a reduction in the number of psychiatric hospital beds, as well as fewer services for mental health emergencies and longer waiting lists for housing for the chronically mentally ill. The cuts are coming just as some experts say economic pressures are creating an increase in mental illness.

Although no national numbers are available, hospital emergency rooms, juvenile courts, child welfare agencies, local jails and homeless shelters are reporting bulges in the number of mentally ill people who end up on their doorsteps after failing to get help elsewhere.

In addition, a recent national survey showed that the weak economy is taking a toll on the mental health of Americans, with unemployed people four times as likely as those with jobs to report symptoms of severe mental illness.

“States are chipping away at their already very fragile mental health system,” says Michael Fitzpatrick, executive director of National Alliance on Mental Illness , which advocates for improved mental health care. “More people will be unable to find even basic services that allow them to stay out of the hospital or involvement with police. It’s a dire situation that we’ve never seen before.”

Funding fluctuations

Since the 1950s, when states cared for more than 500,000 people in psychiatric hospitals, state mental health programs have included more and more community-based services. Those include a wide array of services, such as suicide prevention and 24-hour crisis centers, treatment for drug and alcohol abuse, housing and work supports, counseling and violence-prevention programs.

Although advocates maintain that only half of those in need are receiving public mental health services, states have made progress by serving more people in the community at about half the price of committing them to institutions — and with better outcomes. Today, only 50,000 people reside in state mental hospitals while millions are served on an outpatient basis.

Still, states have had to increase their budgets to keep pace with demand. Despite fluctuations in funding for nearly every other social service, state mental health budgets have increased nationally by about 6 percent per year for the past 30 years.

Now, for the first time, states are pulling back mental health spending. These unprecedented cuts — nearly 4 percent as a national average between 2008 and 2009 — come at a time when other public agencies such as child welfare, law enforcement and housing also are experiencing budget cuts and can ill afford to handle the overflow.

According to the National Association of State Mental Health Program Directors , 2010 spending appears to have fallen nearly 5 percent compared to 2009. Early indications are that 2011 mental health budgets may sink by 8 percent or more.

Exacerbating the mental health budget crisis is uncertainty over whether Congress will decide to extend an increase in the federal match for Medicaid services under the stimulus program, which a majority of states have counted on to stretch their overall health care budgets.

In 2008, states spent $36 billion on mental health services to care for 6.4 million people, about half the number of people advocates say are in need of care. Of the total, about $17 billion came from Medicaid, the federal-state health care program for the poor, $500 million came from federal grants and the balance was funded through state general revenues. Not counted in the total is funding from county and local budgets, much of which also sits on the chopping block.

Where the cuts are

Although a few states have minimized mental health cuts and targeted less essential services, many states are closing psychiatric hospitals, eliminating 24-hour crisis centers and tightening eligibility for subsidized medications and services that affect thousands of adults and children with severe mental illness.

Here are some examples of states that have made big cuts:

To fill a $1 billion hole in its 2011 budget, Arizona slashed this year’s budget for mental health services by $36 million — a 37 percent cut. As a result, advocates say 3,800 people who do not qualify for Medicaid are at risk of losing services such as counseling and employment preparation. In addition, more than 12,000 adults and 2,000 children will no longer receive the name-brand medications they take to keep their illnesses in check. Other services such as supportive housing and transportation to doctor’s appointments also will be eliminated.

Arizona has been considered a progressive state because it provides the vast majority of mental health services through cost-effective outpatient community programs. By slashing these programs, experts say the state will force more people to use emergency rooms or end up in the criminal justice system, which will cost the state more.

In Illinois, where Democratic Governor Pat Quinn is trying to bridge a $13 billion budget gap, a proposed mental-health budget cut of $91 million was reduced to $35 million after patients and practitioners protested at the governor’s mansion earlier this month. Even so, advocates say more than 70,000 people, including 4,200 children, are in danger of losing basic community services, which may result in more instances of hospitalization. The cuts come on the heels of a court settlement requiring the state to transfer 4,500 severely mentally disabled patients out of nursing homes and into community residential facilities following a string of rapes and assaults on elderly residents.

Mississippi has cut its mental health budget by about 8 percent for three consecutive years, resulting in the closure of a residential mental health facility for adolescents, elimination of 184 beds in one of the state’s biggest psychiatric hospitals and consolidation of six crisis centers with existing community mental health centers. In the fiscal year that started July 1, the state plans to further cut funding to localities for mental health services. Prior to the recession, Mississippi lagged far behind most states in funding community services and housed the highest percentage of people with mental illness in state institutions.

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Christine Vestal

Christine Vestal covers mental health and drug addiction for Stateline. Previously, she covered health care for McGraw-Hill and the Financial Times.