People don't realize this, but the modern American mental hospital is not a place where someone is meant to live. Ideally, they are a place where people with mental issues who are psychotic become stabilized and able to communicate and act appropriately. The modern American mental institution is not a place geared to become a home. It is a medical facility only.
Also, I think states should have different facilities for people with different problems. There should be facilities for people with schizophrenia, mood disorders, personality disorders, suicidal depressives, and facilities (like the one I imagined above) for the mentally retarded. Each type of facility would be specifically geared to treat their patients. This would be much more effective, and in the long run cheaper, than the throw-all-the-crazies in a single building type of institution we have today.