U.S. General Accounting Office 
Report to the Committee on Finance, U.S. Senate
Washington, D.C.

Between 1987 and 1997, the growth in mental health spending in the United States roughly paralleled the growth in overall health care spending. After adjusting for overall inflation, spending on mental health services grew by 4 percent a year, on average, compared with 5 percent a year for spending on all health care. However, federal mental health spending grew at more than twice the rate of state and local spending. This led to the federal government's share surpassing that of state and local governments, while the share attributable to private sources declined slightly. Increasing Medicaid and Medicare expenditures accounted for the larger federal share, with combined federal and state Medicaid expenditures accounting for 20 percent of all mental health spending in 1997.

The focus of care for adults with SMI has continued to shift from providing services in psychiatric hospitals to providing services in the community. The ability to care for more people in the community has been facilitated by the continued development of new medications that produce fewer side effects and are more effective in helping people manage their illness. Furthermore, treatment approaches such as assertive community treatment (ACT), supported employment, and supportive housing have been developed to provide the multiple forms of ongoing assistance that adults with SMI often need if they are to function in the community. These approaches can also help homeless people with SMI, whose treatment needs are additionally complex, partly because many of them also suffer from a substance abuse disorder. Coordinating and integrating services can be effective in treating people with multiple needs, and organizing care in this way is especially important for people making the transition from institutions to the community.