The author argues that most of the mentally ill should be treated in the community, where they can develop the skills necessary to function in society. The state hospitals should be used only to treat the most unmanageable patients. The author blames the presently inadequate community care system on insufficient funding and on the tendency of states to divide newly available funds between community services and state hospitals so that neither system is adequate. But whereas community care's problems can be resolved through greater commitment of funds and other measures, the author contends, the shortcomings of the state system are built-in and intractable. He examines and refutes the arguments supporting a return to the state hospital system.