Reagan put the system out of it's misery, the deinstitutionalization movement is what killed it and that began decades before.

When you give schizophrenics the 'right' to decide to AMA themselves, big surprise: it turns out a lot of them eventually have an episode and do exactly that.

As soon as the legal criteria for an indefinite involuntary hold was changed from being unable to make decisions for yourself to an immediate physical risk to themselves or others the state hospital system was dead as enough Chlorpromazine will eliminate that risk in nearly anyone and as it wears off they have plenty of time to AMA before they recover enough to pose a risk.

Funding for programs like the state hospital system is always proportional to the demand and after the activists won the right for the mentally ill to make bad decisions the demand dried right up to the point that it was difficult for the few patients in some facilities cognizant enough to realize they really needed to stay because the facilities lost all of their economies of scale.

Deinstitutionalization as a concept only works is you assume the mentally ill will never make a decision during a crisis and will put the community's well being above their own. Those are very big asks in any population let alone the mentally ill.

Legally where we are since right before Reagan took office is at best catch and release. You can get a 72hr hold, but it is almost impossible to get longer or release conditional on continuing medication until they have committed a serious crime.

Since 80-90% are just going to AMA anyway it is extremely difficult to justify more than 10% of the spend we had on the 1970s which was already a severe reduction from what we had been investing a few decades before.

If it hadn't been Reagan it would have happened itself after a longer period of substandard care as the funding ran out on its own.