From the Daily Signal:
[Rep. Tim] Murphy’s (R-PA) legislation, dubbed the Helping Families in Mental Health Crisis Act, would repeal a 1960s-era ban on using federal dollars to pay for residential treatment in psychiatric hospitals.
Currently, states must shoulder the bill for psychiatric care for the poor and homeless. As a result, the number of psychiatric resources is scarce. 
The bill also would amend the 1996 Health Insurance Portability and Accountability Act to bring a patient’s family into the loop concerning treatment. Murphy maintains that mental health patients do best when families take an active role in treatment.
Funding outpatient mental health services while shunning inpatient facilities had an air of nobility about it in 1963 when the first legislation promoting deinstitutionalization was passed. But after decades of suicides of the mentally ill, homelessness and deadly outbursts, deinstitutionalization is becoming seen more as a historical phase than as an inevitable goal.
Behind many mass killings are the stories of families trapped in struggles with mentally ill relatives for whom the government offered little practical help. Services follow money, and the ban on using Medicaid and other Federal resources for inpatient treatment has helped lead to a severe shortage of beds.
Except for the most profoundly disturbed, people with mental illnesses respond to incentives just as we do. A person can take street drugs, neglect to take their psych meds and live life on their own terms until their behavior deteriorates.  At that point they will attract the attention of either the legal system or the medical system. In the health care system, doctors know that state mental hospital beds are so scarce that the patient will be a boarder in the acute care hospital often for a week or more before he or she can be transferred. It is a great incentive to turn the person loose, and the ill person knows it.
Having more inpatient psych beds would not, I believe, lead to a “lock them up and throw away the key” attitude. Use of modern medicines  allows all but the most troubled people to return to their communities after a short stay in a facility. But the very existence of such facilities would encourage people to take their meds and go to their doctor appointments. Because people really hate going to the psych hospital. I expect some misguided advocates for the mentally ill to make a civil rights case against reviving inpatient treatment. We should not allow the fears of people who are functioning in the community and who are in little real danger of being involuntarily committed to prevent giving effective help to the more seriously ill. A “civil right” should not condemn untreated mentally ill people and their families to lives of helpless misery.
Having a better balance of inpatient to outpatient mental health services will, I expect, make outpatient treatment work better. Families will be less stressed if there is an facility immediately available to deal with crises. Some homeless people might move to a stable existence since as inpatients they could receive more thorough treatment. And almost certainly we will see fewer suicides and killings by untreated mentally ill individuals.

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