The State's primary responsibility should be to provide as high a degree of public safety as possible. If someone needs psychotic care, the responsibility for that, like other health needs, should primarily rest with the individual, then the family. 
As for individual privacy, that should diminish depending on the degree of public assistance or care that the individual received.
Any person judged to be mentally ill, or unfit, should lose their right to vote, to carry dangerous weapons, & if judged to be a threat, they should lose their freedom.  Lock 'em up!