By Todd Zwillich

WASHINGTON (Reuters Health) - America's system for treating and rehabilitating people with mental illness is in financial and bureaucratic disarray and is plagued by complexities that make it nearly impossible for many patients to receive needed care, according to a report issued Friday by a presidential mental health commission.

The commission's chairman, who called the report an "indictment" of the nation's mental health care system, said that a massive shift in priorities was needed to improve care for mentally ill adults and children. The report paints a picture of a system plagued by fragmented services and inadequate funding, often losing patients in a maze of complexity.

Between 5% and 7% of Americans are believed to suffer from a serious mental illness in any given year, according to federal figures. While some patients have private insurance coverage, most receive care through a patchwork of federal and state programs.

The report is an interim step for the New Freedom Initiative, a comprehensive review of the nation's mental health system ordered by President Bush last April. It was written by a panel of policy experts from the government and the private sector, who are later expected to recommend ways to repair the system.

Dr. Michael Hogan, the commission's chair, said that the panel's deliberations lead it to conclude that the nation's mental health delivery system is "maddeningly complex and dysfunctional."

The report criticizes child mental health systems that often cut adolescents' benefits as soon as they turn 18, forcing them to navigate a new system of care geared toward adults.

Adults with a combination of mental illness and drug or alcohol abuse, which according to the government number 3 million, often cannot get care for both problems in the same clinic or with the same government benefits.

"Because mental illness and substance abuse disorders are often long-term in nature, the inconsistencies of the system play out day-to-day, week-to-week, and year-to-year," the report states.

The commission also pointed to studies showing that mental illness and substance abuse are the two leading causes of disability in North America and Europe, together accounting for more than one third of all claims. But disabled--and usually unemployed--persons who seek care in the US often risk their Medicaid healthcare benefits if they get well enough to rejoin the work force.

"They can't afford to get back to work because they lose their health insurance. We have trapped people in a system that is at least as dysfunctional as the old welfare system," said Hogan, who is the director of the Ohio Department of Mental Health.

Hogan made an example of the problem of suicide, which takes the lives of approximately 30,000 Americans each year, twice the number that die annually from AIDS.

Serious mental illness is implicated in upwards of 90% of all suicide cases, though the government spends some $3.2 billion per year on AIDS research and prevention and only about $40 million studying suicide, he said.

The commission is due to release a final report within 6 months giving the president recommendations on how to repair the mental health system.

The American Psychiatric Association released a statement criticizing the effort, saying that the commission has "unreasonably limited" its evaluation of the mental health care delivery system to budget-neutral solutions and did not look at disparities in privately funded insurance.

"The public at large, the media, opinion makers, and political leaders must be made aware of the perilous state of financing for mental health care today," read a statement from Dr. Paul Appelbaum, the organization's president.