Only in America would we rely heavily on jails and prisons to house many of the severely mentally ill whose untreated symptoms have driven away family and whose pursuit of self medication brings them into contact with crime and law enforcement. Two generations ago we held such people in state mental hospitals. No one intended to transfer them to jails, but a long period of declining social welfare and a war on crime has produced that result. It is thus good news that as of this July, federal law will start requiring health insurance provided by employers to treat mental and physical illness with parity (read Robert Pear's reporting in the NYTimes). For decades, insurance companies have kept benefits in general for mental illness, and hospitalization in particular, at far lower levels than equivalent provision for physical illnesses. In some cases this results in mentally ill people who have insurance coverage, being returned to the streets before they can stabilized.
Since those who end up in jail and prison are less likely to have employer provided insurance (although some dependents will), it is even more important to expand hospitalization benefits provided by government insurance programs like medicaid. Indeed, the biggest single thing Congress could do right now to reduce incarceration would be to pass comprehensive insurance legislation which would begin quickly to cover many of those most at risk of ending up in jail instead of the hospital.