Policy reform dilemmas in promoting employment of persons with severe mental illness

Recent evaluations by the U.S. General Accounting Office and the National Alliance for the Mentally Ill of reemployment efforts of the federal-state vocational rehabilitation program found that services offered by state vocational rehabilitation agencies do not produce long-term earnings for clients with emotional or physical disabilities. This paper examines reasons for these poor outcomes and the implications of recent policy reform recommendations. Congress must decide whether to take action at the federal level to upgrade programs affecting persons with severe mental illnesses or to continue to rely on state decision making. The federal-state program largely wastes an estimated $490 million annually on time-limited services to consumers with mental illnesses. Rechanneled into a variety of innovative and more appropriate integrated services models, the money could buy stable annual vocational rehabilitation funding for 62,000 to 90,000 consumers with severe mental illnesses. Larger macrosystem problems involve the dynamics of the labor market that limit job opportunities and the powerful work disincentives for consumers with severe disabilities now inherent in Social Security Disability Insurance, Supplemental Security Income, Medicare, and Medicaid.