WHY DO STATES PRIVATIZE MENTAL-HEALTH-SERVICES - 6 STATE EXPERIENCES

State governments fund more than one-half of public mental health serv ice system costs through mental health departments, other state agenci es, and the Medicaid program. They use some of these resources to fina nce community-based mental health services through purchase-of-service contracts. I explored the reasons why states privatize mental health services and focused on political, economic, and organizational theori es as possible frameworks for contracting. I gathered data during site visits to Massachusetts, Michigan, New York, Oregon, Tennessee, and T exas, where I interviewed more than one hundred individual stakeholder s about mental health purchase-of-service contracting. I also examined relevant documents about contracting practices for mental health serv ices in each state. My results suggest that state policy makers can us e mental health contracting to effect multiple goals. Contracting help s states achieve political, economic, and organizational objectives, s uch as avoiding the influence of interest groups and leveraging state resources, while avoiding conflict. With contracting, state policy mak ers can also continue the ongoing mental health policy paradigm shift begun during deinstitutionalization, in which persons with serious and persistent mental illnesses receive services from community-based pro viders rather than in state hospitals. Finally, my results suggest tha t contracting will continue to be an important state policy tool in fu rther development of state-supported mental health systems.