I'm going to assume that you've never had a family member who was addicted to drugs, or if you have, that just trying to handle the matter "internally" actually worked, and if so, you need to start worldwide seminars about the issue.

Drug abuse does not end because the abuser says, "Oh crap, I've been doing WHAT this whole time!? Man I had no idea, of course I'll stop". OP's sister is textbook impulse-driven. From what OP has said about her sister's excuses, and chronic behavior in the past about stealing, we know the problem didn't start yesterday. OP isn't just saying, "My sister stole from me so she should go to jail", she is saying "She is a drug addict, has a baby on the way, just stole upwards of $100 from her own family, and is doing nothing about it but making excuses". This is why she needs rehabilitation. The criminal Justice system is the only place she will get it if she won't seek it out herself. I agree that the long, drawn-out process is agonizing, but it is necessary. What you are essentially saying is that if OP wants to help her sister, she should keep this issue within a family that has done nothing but enable these actions this whole time....................................

If OP's sister ends up in jail, or more likely, on parole, then she now has a legal force that is driving her to come clean and straighten up. If she continues to violate parole with dirty urine, then this is not a reason for why "the justice system just doesn't work", this tells us that they are trying to get OP's sister off drugs, but she isn't complying with the treatment plan that she is most likely receiving. Most of the time, they allow a certain level to be in your system of what they gave you to kick your addiction, and if she is taking too much, then the problem is still there and new actions need to be reviewed. I agree that mental health can be useless depending on the type, but there is still a LARGE amount of effort that the client needs to present for it to work. There is no doing nothing at this point. If OP cares about her sister, then the hard decision that needs to be made is how far she needs to go to give her the help she needs. You are right that this process is going to be difficult, painful, a nightmare, etc... but who said that rehabilitating drug abuse was easy? It's one of the most pressing issues in the United States. Whether it is chemical or behavioral, it is ALWAYS difficult, but not for lack of trying.