Life has never been easy for people with mental illness. Since the beginning of recorded time, people with mental illness have been feared, shunned, imprisoned, and even killed. We fear what we do not understand, and mental illness has only recently been understood. It has been within just the last few decades that we have discovered some of the mechanisms that cause what we now know to be neuro-biological brain disorders.
    As our understanding of the causes of mental illness increases, coping strategies and preventive measures are being developed. However, at this point in our history, since we still don't understand fully the causes of mental illness, we are yet unable to cure it. At this point, we can only help individuals who suffer from these illnesses to manage them as well as possible within systems that are very limiting and restricting.
    Just three decades ago, it was common to keep people with mental illnesses in large institutions. Although we now criticize those old institutions, they were an improvement over what was previously available - jails, alms-houses, or no care at all.
    In the late 1800s Dorothea Dix served as a tireless advocate, pushing state governments to take responsibility for helping people with serious mental illnesses. She wanted states to provide safe and humane hospital care. Unfortunately, in the hands of the states, Dorothea Dix's vision of humane and professional care steadily devolved into backward warehousing and shameful neglect in far too many state mental hospitals.
    Along with the 1960s civil rights activism came important new social welfare legislation and newly discovered psychotropic medications. Federal programs including Medicaid and Medicare were created that helped pay for community-based hospital and nursing home care. Supplemental Security Income (SSI) provided at least limited financial resources for poor persons whose disability prohibited them from working.
    These social and medical forces fueled the community mental health movement, which opened the doors of state institutions, moving many mentally ill persons into less-restricted lives in local communities. President Kennedy signed the Community Mental Health Act in l963, providing federal funds for the building and staffing of community mental health centers. These Community Mental Health Centers (CMHCs) were designed to provide "close to home" out-patient mental health care for all citizens who needed it. A system of care was envisioned that would provide needed medications and emergency care for discharged state hospital patients, as well as acute and ongoing care for newly ill citizens. It was hoped that with this "close to home" service availability, few Americans would need to be hospitalized for long periods of time. It was hoped that with new symptom-managing medications and local out-patient care, people with serious mental illness would be able to live on their own in our local communities.
Psychiatric Hospital Bed Closures

For-profit psychiatric hospitals proliferated in the 1970s, when long-term treatments were popular and the number of psychiatric diagnoses was increasing. Drug and alcohol treatments added to the potential patient load. As costs skyrocketed, managed care stepped in and began to subsume mental health patients. At the same time, medications were being developed that helped patients to manage their own illnesses and outpatient care was more feasible and popular.      As a result:      In 1956, N.C.'s 4 psychiatric hospitals housed more than 10,000 patients. In 1998, they served about 1,900.      461 beds (270 adult and 191 child/adolescent) have closed in the last two years      4 of 5 Charter hospitals have closed      This may increase to at least 549 in the next few months      At the same time, admissions increased 4.6 percent from FY1999 to FY2000.      One of the closed Charter hospitals for children and teenagers in Guilford County has been taken over by Moses Cone Health Systems. Making a financial go of the hospital, however, will be a challenge. (www.news-record.com/money/news/cone26.htm) In the decade from 1988 to 1998, the value of general health care benefits fell 11.5 percent. Mental health benefits, however, fell 55 percent. The average benefit in 1988 was $154.48, while in 1998, it was only $69.87.      The big question is "Is this enough?" Will people get the amount and quality of care, in- and out-patient, that they need? Can caretakers survive on the amounts that funding sources pay?

    Unfortunately, this system of care was never fully put into operation. The Community Mental Health Movement had lofty goals - now recognized as too idealistic and far reaching - but had too few resources. Even the movement's skeptics underestimated how challenging these goals would be.
    By 1977, the federal government had funded only 650 of the proposed 1,500 CMHCs to be built across the country. Less than one-half of U.S. residents achieved access to "close to home" care. Nor was the operational funding for the constructed CMHCs created fully forthcoming.
    In the 1980s under President Reagan, categorical funding was changed to block grant funding. This allowed state governments to spend federal money that had been previously reserved for community mental health services in other areas. This reduction in actual community service capacity was happening at the same time that state hospitals were reducing bed capacity, with the assumption that the new community system would be able to handle the increased numbers of discharged patients. Across the country, state hospitals reduced in size from 558,922 patients in 1955 to only about 115, 000 patients by the 1980s, an astonishing 80 percent reduction. Many individuals fell through large cracks in a system with more vision and rhetoric than dollars.
    What we have learned since the 1963 CHMC legislation is that most people with serious mental illness need nearly the same range of services in the community that they utilize in a hospital.
    Many need daily help in getting along in their apartments, boarding homes, and family homes. Because mental illness strikes so many in their late adolescence, before they are functioning adults, many missed the opportunity to develop the skills needed to live on their own, work at a job, save money, etc. As adults, they still need to be taught these skills, often for the first time. Many need on-going, long-term supervision. Although it probably costs less to treat most seriously mentally ill people in the community rather than in a hospital, it is neither easy nor less time-consuming.
    A GAO report in 1978 criticized the CMHC movement for not adequately taking care of the hundreds of thousands of de-institutionalized mental hospital patients living in local communities. It cited specific and wide-ranging examples of the movement's failure. States were criticized for not coordinating state hospital and community care. Few agencies were helping people with mental illness learn to work or live successfully in independent apartments. Due to the lack of alternatives, this critique is as valid today as it was in 1978. Many people had been admitted to nursing homes financed through federal Medicaid dollars.

Mental Health in North Carolina
    How does the public mental health system in North Carolina compare to the national trends outlined above?
    North Carolina's public mental health system was not unlike most other states in the 1950s and 1960s. Around 1970, in response to the funding opportunities made available through the federal Community Mental Health Centers Act, legislation was enacted to develop a system of community-care through the creation of a network of Area Programs. The Area Programs were required to provide the minimum level of services required by the CMHC Act (emergency care, outpatient care, consultation and education, linkages to inpatient care, and partial hospitalization). Many former hospital patients were discharged into the community.
    In the late 1970s, funding from the National Institute of Mental Health (NIMH) provided seed money to North Carolina and other states who were willing to develop coordinated systems of care for people with serious mental illness and children with serious emotional disturbances. To receive this funding, states were asked to develop a wheel of services (with the client in the center). "State of the art" thinking required states to develop family, housing, school, and employment supports, along with traditional emergency and therapy-oriented services. Research demonstrated that seriously ill adults and children could live successfully outside of hospitals and institutions, as long as they received a broad range of supports and services.
    North Carolina received some of this NIMH Community Support money through the state Division of Mental Health, Developmental Disabilities and Substance Abuse Services (MH/DD/SAS). These funds helped spawn numerous day treatment, employment, housing, and residential treatment programs that had not previously existed in the state. Case management services were developed for the first time.
    Unfortunately, this federal funding was available for only a few years. States were then expected to find ways to support this array of valuable supports and services on their own. Like many states, North Carolina was unable to find the needed state dollars, and the availability of community-based services for persons with serious mental illnesses and emotional disorders decreased again.
    Out of frustration with the lack of services, two class action suits were instituted in North Carolina that forced the state to serve a set of violent mentally ill children and a set of adults who are both mentally ill and developmentally disabled. The resolutions of these suits, which have come to be known respectively as the Willie M. and Thomas S. consent decrees, forced the state's Division of MH/DD/SAS to develop community-based services for these populations so that they were not sent to institutions for lack of alternative services.

The Willie M. Program

The lawsuit was filed in 1979.

Class members are under the age of 18 and have serious emotional, mental, or neurological impairments that are accompanied by violent or assaultive behavior. Area programs received 88 percent of the $64 mllion for these services in FY 2000; administrative costs were 4.4 percent, and secure treatment for class members used 6.9 percent.

1,931 children were served in FY97/98.>

42 percent had an average cost of $5,130 per year. 10.5 percent had a cost of $100,000 or more.

70 percent are in public schools, 30 percent live at home, 12 percent are in locked facilities.

75 percent have been removed from their homes by state or local government; 52 percent have been physically abused; 33 percent have been sexually abused; 57 percent come from families with mental disorders; 53 percent come from families with substance abuse problems.

The class action was dismissed in 1998.

The Thomas S. Program

The lawsuit originated in 1982.

68 percent of class members served are male; largest group are geriatric, second largest from 30 to 50 years old with mental illness; most members are mild to moderately mentally retarded; most have multiple disabilities - mental illness, mental retardation, and substance abuse.

Area programs received 96.3 percent of the $89.8 million for these services in FY 2000; administrative costs were 3.7 percent.

1,166 clients were served in 1997-98.

The average gross cost in 1997-98 was $94,000.

The lawsuit was dismissed in 1998.

These class action suits resulted in vastly improved services to these two populations, at the cost of care for other needy individuals. In fact, most of the increase in state mental health appropriations over the past decade has gone to serve the class action suit members. In FY 1998-99 the two court-ordered treatment programs alone consumed nearly one-third of the total state mental health funding to support less than 1 percent of the clients served by the system - about $215 million of total mental health resources of about $650 million. As of 1998, both suits have been settled, and state dollars will no longer be set aside for specialized treatment for these groups. Time will tell how the quality of care for these groups will be affected, whether those increased funds will remain in the mental health system, and, if so, how they will be allocated.

The North Carolina Mental Health System Now
What does North Carolina's public mental health system look like today? It is essentially made up of two parts: a state hospital system and a system of community-based care.

These two components of the system are operated separately and independently of one another, although they both fall within the purview of the state's Department of Human Resources.

The state hospital system consists of four institutions: Cherry Hospital in Goldsboro serves the eastern part of the state; Dorothea Dix Hospital in Raleigh serves south central North Carolina; John Umstead in Butner serves citizens living in the north central part of the state, and Broughton Hospital in Morgantown serves western North Carolina.
The total inpatient capacity of these four institutions is about 2,288 persons at any one time. The state hospital system is administered directly through the Department of Human Resources, Division of MH/DD/SAS. Staff working in the state hospitals are state employees.
The community-based system is administered in a totally different manner. As per the vision of the Community Mental Health Movement, CMHCs were to be locally-administered. Counties and groups of counties were allowed to apply for start-up construction and staffing funds independent of state planning and oversight. Local advocates had a lot to say at that time about which counties took the lead in applying for funding and where services were to be located. This reliance on local grassroots initiatives has resulted in much variation in the CMHCs in North Carolina. Some Area Programs are large; some are small; some involve many counties; some serve only single counties (of varying size).
By the end of the 1970s, North Carolina had more than 40 CMHCs. All but two came to be governed by independent local political subdivisions of the state, referred to as Area Programs. (The Mecklenburg and Wake Area Programs are departments within their county governments). Each Area Program is governed by an Area Board, whose members are appointed by the respective county commissioners. Multi-county Area Boards must include at least one county commissioner from each member county. Counties can choose to realign themselves, as has happened recently.
Currently, the state has 39 independent Area Programs serving all 100 counties. Twenty-four Area Programs are multi-county programs, serving between 2 and 7 counties each; 15 are single-county programs. These single-county programs serve 42 percent of the state.

Funding for the two areas of the public mental health system in North Carolina, hospitals and Area Programs, is totally separate. Funding levels are inconsistent and perhaps inadequate. Services provided vary in quantity and quality. Standards are neither formalized nor enforced. All Area Programs in the state provide medication clinics, outpatient counseling, some version of psychosocial rehabilitation or day treatment, and some supported housing. However, there are vast differences in the accessibility of inpatient, outpatient, and emergency services and in the levels of services provided to special populations, such as the elderly, children, multiply disabled, and the severely mentally ill.

Mental Health System Finances
About 90 percent of the funding for the North Carolina public mental health care system comes from two sources within the Department of Human Resources: The Division of MH/DD/SAS and the Division of Medical Assistance (Medicaid). The Division of MH/DD/SAS distributes state general fund money to state institutions and Area Programs, and it distributes federal block grant funds primarily to Area Programs. Nearly 40 percent of the general fund money that passes through the Division of MH/DD/SAS goes into state institutions. Another 30-40 percent has historically been tied to class action suit members (Willie M. and Thomas S). This has left Area Programs with only 20-30 percent of the state's general fund allocation. Of that $567.8 million (1997-98 AP funding not including Willie M. and Thomas S. funds), 44 percent goes for Mental Health, 38.5 percent for Developmental Disabilities, and 16.7 percent for Substance Abuse. Of the total $850.1 million, 38.7 percent came from Medicaid, 38 percent from the State, 14.5 percent from other sources, and 8.8 percent from the counties.
The Division of MH/DD/SAS provides support and technical assistance to Area Programs and monitors each program to ensure that minimum state standards and requirements are met. The money from the Division flows to Area Programs through contracts. Per capita funding for service provision varies across Area Programs, from a low of $27 per resident to a high of $93 per resident. Area Programs are expected to supplement state funding through local government contributions, contracts with other governmental agencies, private insurers, individual fee collections, and, most significantly, Medicaid billings.
N.C. Public Psychiatric Hospitals

Hospital	Location	Year Opened	No. Beds	FY98/99 operating budget	Persons served FY97/98	Staff
Dorothea Dix	Raleigh	1856	429	$67.4M	4,151	1,375.14
Broughton	Morganton	1882	632	$60.1M	4,200	1,325.30
Cherry	Goldsboro	1880	632	$59.8M	2,991	1,271.09
Umstead	Butner	1944	513	$63.1M	5,188	1,305.20
		TOTALS	2,290	$250.4M	16,530	5,277.20

Persons served FY1997/98:
10,938 Mental illness
  2,717 Substance abuse
     829 Forensic
       46 Mental retardation.
Of these, 13.5 percent have primary diagnosis of schizophrenia, 28.6 percent have alcohol and drug diagnoses, 53.4 percent are aged 25-44, 64.0 percent are male, 61.0 percent are white, 36.5 percent are African-American, 67.5 percent are involuntary admissions.

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Area Programs receive Medicaid reimbursements through the Division of Medical Assistance via fee-for-service billings. As state dollars have increasingly been directed toward special populations (i.e., class action suit members), Area Programs have increased their billings to Medicaid to pay for other eligible service populations. Medicaid reimbursements currently represent nearly 40 percent of Area Program revenues.

Area Mental Health Programs The provision of mental health in North Carolina is a cooperative effort of the state and local governments. Public mental health services are coordinated and delivered primarily on the local level by Area Mental Health Programs. Area Programs provide services directly or under contract with other service providers. All funds appropriated by the General Assembly for the purpose of providing these services are administered by the Division of MH/DD/SAS. State and local governments shall develop and maintain a unified system of services centered in area programs. The public service system will strive to provide a continuum of services for clients while considering the availability of services in the private sector. The furnishing of services to implement the policy of this section requires the cooperation and financial assistance of counties, the state, and the federal government. Area programs are governed by policy-making area boards appointed by county commissions Area programs act as gatekeepers to state facilities Of 39 Area Programs, 24 are multi-county serving between 2 and 7 counties, 15 are single county. Budget range: FY94/95     $3M to $46M FY98/99     $6M to $73M County funding for Area Programs ranges from $150,000 to $24.6M. Why is there so much variation in per capita funding among Area Programs? Some Area Programs applied for and received Community Mental Health Center federal grants in the 1970s and the General Assembly picked up about 40 percent of those grants when they ended. Historical patterns of funding by the General Assembly. Larger urban areas can get some targeted Federal funds (e.g., HIV). High population growth may not be matched by increases in funding. Some Division funds are awarded through grant application processes, and some Division funds are allocated by specific needs, such as a long DD waiting list of services. Prior to the mid-1980s, funding for Area Programs was not systematized. Current catch-up funding strategies: Per capita calculations are based on Division funding only. Only expansion funds are used to equalize per capita funding, no readjustments. Expansion funds are allocated based on 50 percent per capita and 50 percent catch-up needs. The General Assembly, although endorsing this methodology, has never appropriated funds specifically designated for catch-up or equalization.

People who have specialty funding (those who are Medicaid-eligible, those with private insurance, those who are members of class action suits, etc.) usually have access to the widest range of services at Area Programs. Unfortunately, more people without specialized funding require services through our public system than do those who have such funding. For example, Medicaid-eligible people comprise only about 25 percent of those requiring service, and class action suit members comprise only 1 percent of the served population. Adults and children who are poor but not on Medicaid, and those with a primary diagnosis of substance abuse fare the worst in our public mental health system. The fact is that while state and county appropriations are intended to serve these uninsured indigents, resources have not kept up with the burgeoning demand.

Ironically, Medicaid stands as an impediment to serving the growing number of indigent uninsured who need the state's mental health care services. State policy has encouraged Area Programs to increase their outreach to Medicaid clients because services can be provided to Medicaid recipients with only one-third of the cost borne by the state. (Medicaid policy requires the state to pay only one-third the cost of care; it pays the remaining two-thirds.) Thus, although more people are being served through Medicaid billing at a lower cost to taxpayers, certain priority populations that do not receive Medicaid are being dramatically under-served. That is because the money the state could use to pay for the mental health care of these people is being spent to cover the state's financial obligation to Medicaid. Service priorities are based on coverage rather than need. Area Programs are increasingly turning non-Medicaid-covered people over to state institutions because they are decreasingly able to help them.
The way the public mental health system is funded has a huge impact on who gets what services in North Carolina. As mentioned above, there are numerous funding sources available. Nearly each funding source is tied to certain rules and has certain restrictions, limiting who can be served and what services they can access. Area Programs end up determining who gets what services based on the mix of funding they receive. Area Programs have a financial incentive to send poor, non-Medicaid-eligible clients with severe illnesses, who are often difficult to care for, to state institutions for care because they do not have to pay for their care once in a hospital. As long as the two areas of our public mental health care system continue to receive their funding independent and separate from one another, how can we possibly hope to provide a system that offers appropriate and sufficient care for all our citizens who need it?

The disparity and inaccessibility of care for people in need is exacerbated by the fact that the total dollars available for the public mental health care system in North Carolina is decreasing steadily. There is no automatic increase for inflation. This has cost Area Programs $68.9 million in inflation-adjusted state dollars just since 1994, a difference of $206 per client per year. As a result, expensive hospital use is on the rise, indigents have poor access to public services, and Area Programs are in financial crisis.

The Games People Play (from the Auditor's Report, page 98) One way to understand the present system and its lack of accountability is to view it as an "unspoken agreement" among the three main players - the General Assembly, the Division, and the Area Programs. The General Assembly says to the Division, "you have to make do with what we can give you and make sure that each of the main advocacy groups feels prioritized." The Division says to the APs, "you must provide all these services to all these groups, but we can only give you this much money." And the APs say to the Division and the General Assembly, "we'll do the best we can with what you give us, but there is really no way, so don't bother to hold us accountable." Of course it is not this simple. Federal regulators and lawsuits, maverick counties, accreditation bodies, and consumer advocates expect delivery of quality services, track spending closely, and increasingly insist on receiving real data about the impact of these services. The end result is that the "conspiracy" is broken, but there is still no clear forward path.

Conclusion
Like many states, North Carolina's system of mental health care has never fully materialized. We have many of the needed pieces in place, but they are disjointed and unevenly available across the state. Financial appropriations sit at the heart of the problem. As we try to reform our current system, it is imperative that we be influenced more by what treatments make sense for those most in need than by sources of funding so that we can restore confidence in and satisfaction with the mental health care system in our state.