Previously unpublished data for 2004-2005 show that in the United States there are now more than three times more seriously mentally ill persons in jails and prisons than in hospitals, thus warranting this study's conclusion that "America's jails and prisons have become our new mental hospitals." Recent studies indicate that at least 16 percent of inmates in jails and prisons have a serious mental illness. This compares with 6.4 percent in a similar 1983 study. Other studies report that 40 percent of individuals with serious mental illnesses have been in jail or prison at some time in their lives. Regarding the capacity of hospitals to treat mentally ill persons, in 1955 there was one psychiatric bed for every 300 Americans; in 2005, there was one psychiatric bed for every 3,000 Americans, and the majority of the beds were filled with court-ordered (forensic) cases. From a historical perspective, America has returned to the early 19th century, when mentally ill persons filled the Nation's jails and prisons. With a determination and the political will to do so, States can address this problem by using assisted outpatient treatment and mental health courts and by holding mental health officials responsible for outcomes. The Federal Government can address this problem by conducting surveys that compare the States on this issue and then attaching existing Federal block grants accordingly. Also, the Federal funding system should abolish the "institutions for mental diseases" (IMD) Medicaid restriction. 67 references, 1 table, and 1 figure