The state has wasted at least $400 million in an ill-conceived and poorly executed plan to treat more mentally ill people in their own communities and fewer in the state's four psychiatric hospitals, a News & Observer investigation shows.

Local governments, forced to stop offering treatment, were replaced by providers out to make a profit. Most of their workers were high school graduates, not licensed professionals, but the bill was stunning. In a few months, the cost of the community support program was $50 million a month, more than 10 times what the state had expected.

Providers took some clients to movies or shopping, charging taxpayers $61 an hour.

Meanwhile, some seriously ill people had to do without treatment. Services that were more likely to help them avoid hospitalization were in short supply.

It was almost a year before the state reacted.

Hundreds of providers have abused the system, the state now says, charging for services that were unnecessary or were not performed.

So far, the state Department of Health and Human Services has demanded that the providers pay back $59 million. A government review last fall of more than 12,000 people receiving a rapidly expanding community service indicated that hundreds of millions of dollars had been wasted. That review said 89 percent of the treatment was medically unnecessary or given in the wrong amount.

Since the General Assembly ordered sweeping changes in 2001, the cost of caring for the mentally ill has more than doubled, to $1.5 billion a year.

Here's one example of why: Last February, a worker employed by a Durham provider spent five hours with a 13-year-old girl, asking about her day at school and assisting with her homework, according to a government audit. The worker, called a paraprofessional, wrote that "While [the child] was reviewing the vocabulary word, Paraprofessional went to the store for [the child's] mother."

For that session, the company was paid $305.

North Carolina tried to change too many things too quickly, according to Paula Cox Fishman of Greensboro, an activist who has followed reform closely.

"It's a mess," she said. "It's going to be hard to turn this runaway train around."

Responsibility for carrying out mental-health reform fell to the Department of Health and Human Services, led for six years by Carmen Hooker Odom, Gov. Mike Easley's appointee. Department officials made key decisions that hobbled the program. They defined too loosely the community support services companies would offer, and they agreed to pay too much for it.

'Worse off right now'

Harold Carmel, president of the N.C. Psychiatric Association, holds the Easley administration responsible.

"The devil was in the details," Carmel said in an interview. "And they didn't think through all the details. They were overwhelmed by the task. They still are."

Hooker Odom announced her resignation last May, two weeks after informing the governor about what she called a "deeply disturbing" audit of mental-health providers.

Easley and Hooker Odom, the two officials most responsible for implementing mental-health reform, declined to be interviewed.

Rep. Verla C. Insko, a Democrat from Chapel Hill, was the primary sponsor of the reform law. She is not proud of the results.

"I think we're worse off right now," Insko said. "What they did was bring in easy-to-serve people, maybe even people who ... didn't need the service."

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