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A story this week sheds new light on the challenge of providing care and housing for the mentally ill.

As McKnight’s reported today, the Bazelon Center for Mental Health Law, a mental law advocacy group, has issued a report calling for the government to release most mentally ill residents from nursing homes and provide care for them in their homes and communities.

Among its recommendations: The Centers for Medicare & Medicaid Services should streamline its home- and community-based services waiver process so states can use Medicaid dollars to care for the mentally ill outside of institutions.

The mentally ill have become a growing portion of the nursing home population, according to a new study reported on this week. Between 1999 and 2005, the number of nursing home residents admitted with a mental illness rose to 187,478. That exceeds the 118,290 residents admitted with dementia only, according to the study.

So what should we make of these findings? It’s becoming increasingly clear that it’s time to start dealing with the overwhelming number of mentally ill in nursing homes.

Just in March, The Associated Press reported that nearly 125,000 young and middle-aged adults with serious mental illness lived in U.S. nursing homes last year. That was a 41% increase from 2002, when nursing homes housed nearly 89,000 mentally ill people ages 22 to 64.

Younger mentally ill people now account for nearly 10% of the nation’s nearly 1.4 million nursing home residents, up from 6% in 2002.

Experts attribute this to a couple trends, including the failure of state and federal governments to care for the mentally ill and a shortage of psychiatric beds. As a result, nursing homes have increasingly become the default option when no better choice seems possible.

Over the last several decades, there have been significant changes in the attitudes toward the mentally ill. One of the turning points was during the Reagan era, when social spending, including funding for mental health services, was drastically cut.

That was a long time ago. It seems appropriate once again to revisit the issue of who should care for the mentally ill, and where.