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What happened to U.S. mental health care after deinstitutionalization?

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If you ask any social policy expert to describe a well-intentioned initiative that didn't work out as planned, the word “deinstitutionalization” will probably appear in her response.

This conventional wisdom is vastly oversimplified. In a recent law review article, University of Michigan disability expert Samuel Bagenstos notes that the broad set of policies designed to move individuals with disabilities out of large institutions into family- or community-based settings was more complicated — and often more beneficial — than is now remembered.

On the whole, deinstitutionalization improved the lives of millions of Americans living with intellectual and developmental disabilities (I/DD) — albeit with many exceptions.  These policies allowed people to live with proper support, on a human scale, within their own communities. Second, deinstitutionalization was far less successful in serving the needs of Americans suffering from severe mental illness (SMI) — again, with many exceptions.

Vincent’s pediatricians advised Janice and Greg to institutionalize him. My in-laws defied this advice. This was a brave and difficult thing to do. Had Vincent’s school-based services, sheltered workshop, and other supports been unavailable, he probably would have languished in the back ward of some state home. He’s more functional, much happier, and much better off in virtually every way because his parents chose a different path.

Of course, many people experience serious difficulties. I’ve written at length about these challenges. Some 730,000 people with intellectual disabilities live with a caregiver over the age of 60. Many of these individuals will outlive their caregivers. Much must be done to address this looming challenge. The variable quality and cost-effectiveness of community-based services, the institutional bias of Medicaid benefits for people with complex conditions, and the low pay and uneven training of the direct care workforce are major concerns.

Still, the historic progress is striking. The number of Americans with intellectual disabilities who live in large state institutions declined by 85 percent between 1965 and 2009, including a 98 percent decline in the institutionalized population of children and youth. People live on a more human scale, too. In 1977, the average number of persons per residential setting was 22.5. Now the average is about 2.5.

Beyond the benefits to specific individuals, the cumulative movement of hundreds of thousands of people out of institutions into their own communities changed America. Not long ago, people with intellectual disabilities were effectively barred from the public schools, workplaces, summer camps, and more. In a million ways large and small, people with intellectual disabilities were pushed to the margins. The implicit message that they needed to be protected from the rest of us — or that we needed protection from them — was incompatible with the dignity of equal citizenship. Segregation also encouraged ignorance and fear. Few people had the personal experience to offset inaccurate or freakish media images of intellectual disability.

I never met the second man, Paul Flannery, depicted below. I do know the woman next to him, his twin sister Ilene Flannery Wells, an advocate for individuals with severe mental illness:

Paul Flannery was hospitalized for schizophrenia in a New York mental hospital for two decades. He experienced various problems there, but he was happier and safer within an inpatient setting than he was after a series of misguided efforts to move him into an assisted-living apartment where he received too-little supervision and professional care.

He and his family suffered as he ran out of food in his refrigerator, yelled at people in the street, declined into destitution, and required various repeated interventions. He finally received decent inpatient care near the end of his life, when a serious respiratory disorder and then terminal lung cancer brought him access to nursing home which cared for his physical and mental illnesses.

Of course, his isn't the only deinstitutionalization story. Hundreds of thousands of people with severe mental illnesses now live safer, more dignified, and happier lives within their communities. New legal protections, community mental health services, federal disability assistance, food stamps, and Medicaid all played important roles. Mental health policies are vastly superior to what they were decades ago.

Yet downward trajectories such as Flannery’s are more common than they should be, and are more common among individuals with SMI (particularly those with co-occurring substance use disorders) than they are among people with intellectual disabilities. It’s worth asking how these disparities are so palpable.

The human arguments for deinstitutionalization were always compelling for both groups. Given the proper supports, most people with disabilities fare much better in community settings than they would in the large institutions where Paul Flannery spent much of his adult life.

Yet the predicament of the mentally ill in particular was worsened by one awkward reality: the economic case for deinstitutionalization — highly appealing to both fiscal conservatives and civil libertarians — turned out to be almost entirely wrong. This economic argument proved actively destructive, since it positioned the goal posts to justify humane policies on the false hope that they would save money rather than on the basis of their ability to improve people’s lives.

The most compelling, wildly naïve economic case went something like this: We have a state mental hospital with a $100 million annual budget that houses 1,000 patients. Many of these patients don't need to be there. If we moved them into community settings, we free up the $100,000 average per-patient costs of this facility, which we can redirect to community mental health centers, housing assistance, and other services to help them.

As Christopher Jencks noted in his elegant little volume "The Homeless," this argument is misguided in almost every way. Of course, state mental hospitals and other institutions included many patients who required few inpatient services. Yet the patients who spent their days playing cards didn’t draw upon many services beyond room, board, and medication, which they would still require (often at higher unit costs) in any other setting. Deinstitutionalizing low-cost patients doesn’t appreciably reduce the hospital’s $100 million budget. It wouldn’t reduce fixed costs of operating the facility. It doesn’t allow managers to lay off staff who spend much of their time working with the smaller subgroup of most-needy or most-disruptive patients.

Even if a case could be made for money-saving measures, collective bargaining agreements and politics impose real constraints. Even if hard measures actually were imposed and money actually saved, there was no automatic process, no obvious valve to turn, that would redirect these financial flows to community-based services provided by other agencies at other levels of government, to meet patients’ needs.

Deinstitutionalization encountered a second nasty economic reality facing state and local governments: Effective community-based supports are generally superior to institutional care. They aren’t necessarily cheaper; often the opposite is true.

Because there was no easy or painless way to save money, the key challenges became legally and administratively intricate: Could individuals with disabilities and their supporters secure the required resources to finance and implement effective services?

As these matters played out, the intellectually disabled again possess key advantages, while people with SMI were all-too-often released from inpatient facilities to communities and families that lacked effective supports to properly help them. Expenditures for the intellectually disabled have grown remarkably since 1980. These expenditures have also shrunk less dramatically than community mental health services in times of fiscal retrenchment, especially in the current recession when outpatient mental health services for “non-Medicaid low-income consumers” face particularly deep cuts.

Fortunately, the Americans with Disabilities Act, and critical Supreme Court decisions such as Olmstead provide powerful tools to guard against the worst policy failures in this area. These established a legal right to community-based services that provide an attractive and realistic alternative to institutional care.

Many people with intellectual disabilities have rather straightforward basic needs which may be costly, but which pose fewer administrative complications. A large subgroup of intellectually-disabled adults require permanent housing when they reach adulthood or when their caregivers approach retirement. These arrangements can be planned over time in partnership with parents or guardians. Individuals with SMI often require more episodic help, which must sometimes be arranged (or re-arranged) in the midst of a crisis. The I/DD population also has access to an alphabet soup of (comparatively) generous help, including supports for residential care provided through Medicaid‘s ICF/MR  program (Intermediate Care Facilities for individuals with Mental Retardation). There is no equivalent set of programs for individuals with SMI.

Since 1965, Medicaid policymakers — wary of subsidizing then-overcrowded, costly, and often low-quality psychiatric hospital systems — have imposed a policy called the “IMD exclusion,” under which Medicaid does not reimburse care at most specialized psychiatric or substance abuse inpatient treatment facilities.  Partly as a result, patients with schizophrenia or addiction disorders who require long-term residential services are served within an uneven patchwork of nursing homes and other inpatient settings, not to mention psychiatric emergency departments, jails and prisons.

Stepping back from particulars, the disparities that prove most damaging for public policy reflect disparities in political standing and social stigma between the two groups. People with intellectual disabilities rank among the most appealing constituencies in America. Their well-organized caregivers — people like me — cross every economic, social, and ideological boundary. I cannot imagine, for example, that a policy akin to the IMD exclusion could be imposed on the intellectually disabled.

Similar differences arise in everyday life, as is obvious to any caregiver. Group homes for the intellectually disabled do not face the same “Not in my backyard” problems that beset similar group homes for people with SMI.  Constrained by stigma and fear, housing facilities for individuals with psychiatric disorders tend to be larger, more clustered within less-desirable neighborhoods. It’s much harder to attract required funds or public acceptance for best-practice SMI interventions.

This story reminds us that good policy ideas aren’t self-executing. They require political backing for their eventual success, particularly when the ideas themselves aren't completely right or when the resulting policies require mid-course correction.

Deinstitutionalization has, on the whole, worked well for the intellectually disabled because they and their supporters could crank the political valves required to make it work. Equally worthy claimants who lacked the same political muscle or public embrace fared much worse. That’s one key lesson of the deinstitutionalization fight.