CONCORD, N.H. — New Hampshire must expand services for people who are severely mentally ill to settle a lawsuit that charged the state needlessly confined people in mental wards or hospitals because it lacked community treatment options, Attorney General Joseph Foster announced Thursday.

By 2017, the state must expand community treatment teams so they’re on call 24 hours a day statewide and create three mobile teams to keep people who are experiencing a mental health crisis out of emergency rooms and hospitals. It must also expand employment assistance and housing opportunities for people with mental illnesses.

It’s estimated to cost $6 million in the current two-year budget cycle and $23.7 million in 2016-17. The state will also pay $2.4 million in legal fees.

The Disabilities Rights Center sued in 2012, saying the state’s lack of services violated the Americans with Disabilities Act and asking a federal judge to order New Hampshire to expand community services and crisis intervention programs. In the suit, the advocates said the state was segregating the mentally ill in institutions and not providing less restrictive alternatives in the community.

The suit came 10 months after a federal investigation found the state’s mental health system failed people in need and three years after the state’s own Department of Health and Human Services Commissioner, Nicholas Toumpas, labeled it a “broken system.”

The federal investigators said the state relied too heavily on confining the mentally ill in the New Hampshire State Hospital and its nursing home component, Glencliff Home.

The advocates can bring the lawsuit back if the Legislature doesn’t find a way to pay for the expanded services, Foster said.

“This settlement agreement, developed in conjunction with the New Hampshire Department of Health and Human Services, enhances the state’s mental health services to address the concerns of the plaintiffs and protects taxpayers from far greater potential liabilities,” he said in the statement.

Amy Messer, the lawyer for the Disabilities Rights Center, did not immediately return a call seeking comment.

Gov. Maggie Hassan said fighting the lawsuit would have cost more in legal fees and “untold millions more” if the state had lost.

“Reaching this settlement also ensures that we can continue addressing our mental health challenges in a fiscally responsible way that protects the state’s budget and that ensures that New Hampshire citizens are driving improvements in our mental health system – not federal judges,” she said.