Over the past three years, 28 states and the District of Columbia have cut a combined total of more than $1.6 billion in funding for mental health services, according to a new report from the National Alliance on Mental Illness (NAMI).

To make matters worse, these sizeable budget cuts have occurred at a time during which demand for mental health services has increased significantly, the report says.

Released November 10, “State Mental Health Cuts: The Continuing Crisis” evaluates the state mental health agency budgets approved by legislatures across the country from Fiscal 2009 to Fiscal 2012. In comparing individual states’ funding outlays for the three-year period, NAMI considered the proportion of each state’s cuts relative to overall budgets for mental health services (see chart).

While some states have made modest increases in their mental health appropriations for Fiscal 2012, the report notes that such gains are undercut by a reduction in federal Medicaid support during the past year. According to NAMI, the expiration in June 2011 of a temporary increase in the federal match for Medicaid resulted in the loss of an estimated $14 billion for state Medicaid programs.

This massive decline in funding has led some states to shift resources to Medicaid services as a means of securing an increased federal match—an approach that has proven problematic for Medicaid nonbeneficiaries in need of mental health services but unable to afford them.

“It is important to meet the needs of Medicaid enrollees, but not at the expense of uninsured or underinsured individuals living with serious mental illness,” said NAMI Executive Director Mike Fitzpat rick in a press release in conjunction with the new report.

In July 2010, Arizona eliminated virtually all services for 12,000 mentally ill individuals who did not qualify for Medicaid, according to the report. And Ohio added millions of dollars to services for Medicaid recipients from Fiscal 2011 to Fiscal 2012, while slashing millions in support of services for those not on Medicaid.

Among the report’s key policy recommendations are protecting and strengthening state mental health services, restoring spending cuts, and preserving access to acute and long-term-care services.

NAMI also recommends improving data collection and outcomes measurement for mental health services.

“In a time of diminishing resources, pressures are increasing on mental health providers to demonstrate that their services are helping people living with mental illness to recover and avoid adverse outcomes, such as hospitalizations, arrests, and suicides,” the report states.

NAMI noted that the data contained in the report are limited to general fund appropriations for state mental health agencies and do not include mental health funds that are under the control of other state agencies, such as state Medicaid agencies, housing authorities, or child and family authorities.

“State Mental Health Cuts: The Continuing Crisis” is posted at <www.nami.org/Template.cfm?Section=state_budget_cuts_report>.