I think that we are both correct. It sounds like Kennedy allowed that mentally ill people had the option of being institutionalized and that Reagan reinforced their rights of self diagnosis (whether they need to be institutionalized or not).
And I thoroughly agree that this had made streets unsafe and that in the long run, it is no help to the mentally ill either.
Just as JFK unionized federal workers he also wanted to federalize mental health.
Excerpts
President John F. Kennedy signed legislation creating a federally funded Community Mental Health Centers (CMHC) program. The legislation and subsequent additions authorized the use of federal funds to construct and staff CMHCs to “provide comprehensive mental health services” to local communities. Kennedy had high hopes for the program, claiming that it would replace “the shabby treatment of the many millions of the mentally disabled in custodial institutions.”
The CMHC legislation was a major departure from existing federal and state responsibilities. For 150 years, the care of mentally ill persons had been vested in the states; a few states, such as Iowa and Wisconsin, passed the responsibility on to the counties.
In 1963, federal funds contributed approximately 2 percent of the costs of services for mentally ill persons; today federal funds contribute over 75 percent of those costs.
The saddest part of JFK’s legacy is that we now have much better treatment and rehabilitation programs than we had in 1963, but they are unused for the majority of the sickest individuals. Reversing JFK’s shift toward federalization and holding states accountable is, ironically, our best hope for fulfilling his original dream.