Understanding the factors that contribute to your problem will help you frame your own local analysis questions, determine good effectiveness measures, recognize key intervention points, and select appropriate responses. Four important factors that strongly affect the current mental health situation in America are deinstitutionalization, criminalization, medicalization, and privatization.
Perhaps the single biggest factor affecting the policing of people with mental illness has been deinstitutionalization.  During the 20th century, and especially after 1960, public attitudes, laws, and professional mental health practices changed, leading to the closing of many state hospitals, psychiatric hospitals, and what used to be called insane asylums. Society’s preference shifted away from institutionalizing people with mental illness. Unfortunately, adequate community-based services to pick up the slack were never provided. This vacuum persists to this day, to the extent of complete failure of the mental health system in many jurisdictions.
After deinstitutionalization, many people with serious mental illnesses were returned to the community, but adequate community-based services were not established. Predictably, calls to the police about crimes and disorder involving people with mental illness increased.  Police tried to handle many of these calls informally, but if the behavior persisted, options were limited. Frequently, efforts at civil commitment were unsuccessful (the person had to pose a danger to him-or herself or others), and other inpatient or outpatient mental health services were unavailable, cumbersome, or uncooperative. Inevitably, police often turned to arrest and a trip to jail as the only available solution to the immediate problem. This had the general effect of criminalizing mental illness and reinstitutionalizing people with mental illness—but in jail or prison instead of a psychiatric facility. One analysis concluded that “in 1955, .3 percent of the U.S. population was mentally ill and residing in a mental institution; whereas in 1999, .3 percent of the national population is mentally ill and is in the criminal justice system.” 
The dominant treatment for mental illness has evolved from electric shock and psychotherapy more toward medication. To be sure, other treatments remain viable, and combined treatments are generally preferred, but today, medication plays a central role. Consequently, an important aspect of community-based mental health care is getting noninstitutionalized people with mental illness to take their medication as prescribed.  Factors that interfere with regular use of prescribed medications include the negative side effects associated with some drugs, the high cost of medication, the tendency to self-medicate, the abuse of illegal drugs and alcohol, and the lack of monitoring/follow-up by the overtaxed community-based mental health system.
Many of today’s community-based mental health facilities, especially group homes, are operated by private individuals or companies. To be sure, government-run mental health facilities can be inefficient, callous, and neglectful. However, private profit-making facilities introduce another issue—greed. Privately run facilities have an inherent incentive to cut expenses; this often translates into minimum staffing levels and low-paid staff, which in turn results in a facility that relies on the police to help manage patients/clients. As a result, police resources are wasted and people with mental illness do not get the quality of care that they deserve.
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