What Was Deinstitutionalization?

How This Federal Policy Worked

Woman walking inside brain maze
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Deinstitutionalization was a government policy that moved mental health patients out of state-run institutions and into federally funded community mental health centers. It began in the 1960s as a way to improve the treatment of the mentally ill while also cutting government budgets.

In 1955, the number peaked at 559,000 patients or 0.3% of the population. If the same percentage of the population were institutionalized today, that would be 1,109,148 people.

Effects of Deinstitutionalization

Between 1955 and 1994, roughly 487,000 mentally ill patients were discharged from state hospitals. That lowered the number to only 72,000 patients. States closed most of their hospitals. That permanently reduced the availability of long-term, in-patient care facilities. By 2010, there were 43,000 psychiatric beds available. This equated to about 14 beds per 100,000 people. 

As a result, 3.5 million people considered severely mentally ill do not receive any psychiatric treatment at all. About 200,000 of those who suffer from schizophrenia, depression, or bipolar disorder often become homeless.

More than 350,000 people are in jails and prisons. Sixteen percent of all inmates are severely mentally ill. There are almost 10 times as many severely mentally ill people in jails and prisons than in hospitals.

3 Causes of Deinstitutionalization

Three societal and scientific changes occurred that caused deinstitutionalization. First, the development of psychiatric drugs treated many of the symptoms of mental illness. These included chlorpromazine and later clozapine.

Second, society accepted that the mentally ill needed to be treated instead of locked away. This change of heart began in the 1960s.

Third, federal funding such as Medicaid and Medicare went toward community mental health centers instead of mental hospitals.   

History of Deinstitutionalization


Congress passed the National Mental Health Act. It created the National Institute of Mental Health in 1949. The Institute researched ways to treat mental health in the community. 


The Food and Drug Administration approved Thorazine, known generically as chlorpromazine, to treat psychotic episodes. The only other treatments available at the time were electroshock therapy and lobotomies. There were only 7,000 psychiatrists, 13,500 psychologists, and 20,000 social workers in the entire country.


The number of patients in public mental health hospitals reached a record of 559,000. They suffered from schizophrenia, bipolar disorder, and severe depression. Many had organic brain diseases such as dementia and brain damage from trauma. Others suffered from mental retardation combined with psychosis, autism, or brain damage from drug addiction. Most patients were not expected to get better given the treatments at the time. Congress passed the Mental Health Study Act of 1955. It established the Joint Commission on Mental Illness and Health to evaluate the nation's mental health situation. 


The commission published its findings in Action for Mental Health. It recommended that community health centers be set up to treat those with less severe mental illnesses. The American Psychological Association’s paper, “Recognition and Prevention of Major Mental and Substance Use Disorders,” said the commission’s research estimated that 20% of the population suffered from some form of mental illness and distress.


Ken Kesey published "One Flew Over the Cuckoo's Nest." It was a fictional story about abuses in a mental hospital. The author dramatized his experiences as a nurse's aide in the psychiatric wing of a California veteran's hospital. The book helped turn public opinion against electroshock therapy and lobotomies. 


President John F. Kennedy signed the Community Mental Health Centers Construction Act. It provided federal funding to create community-based mental health facilities. They would provide prevention, early treatment, and ongoing care. The goal was to build between 1,500 and 2,5000 centers. That would allow patients to remain close to their families and be integrated into society. Many of those in hospitals had no families.


President Lyndon B. Johnson signed the Social Security Amendments of 1965. It created Medicaid to fund health care for low-income families. It did not pay for care in mental hospitals. As a result, states transferred those patients into nursing homes and hospitals to receive federal funding.


California's Governor Ronald Reagan signed the Lanterman-Petris-Short Act. It limited a family's right to commit a mentally ill relative without the right to due process. It also reduced the state's institutional expenses. That doubled the number of mentally ill people in California's criminal justice system the following year. It also increased the number treated by hospital emergency rooms. Medicaid covered those costs. Other states followed with similar involuntary commitment laws.


The film, “One Flew Over the Cuckoo's Nest,” hit theaters. Jack Nicholson's Oscar-winning portrayal of a mistreated patient further turned public opinion against mental hospitals.


Only 650 community health centers had been built. That was less than half of what was needed. They served 1.9 million patients. They were designed to help those with less severe mental health disorders. As states closed hospitals, the centers became overwhelmed with those patients with more serious challenges. 


President Jimmy Carter signed the Mental Health Systems Act to fund more community health centers. But it focused on a broad range of a community's mental health needs. That lessened the federal government's focus on meeting the needs of those with chronic mental illness.


President Reagan repealed the Act through the Omnibus Budget Reconciliation Act of 1981. It shifted funding to the state through block grants. The grant process meant that community mental health centers competed with other public needs. Programs like housing, food banks, and economic development often won the federal funds instead. 


The Food and Drug Administration approved clozapine to treat the symptoms of schizophrenia. That strengthened the prejudice against the hospitalization of the mentally ill.


The Great Recession forced states to cut $4.35 billion in mental health spending in three years.


The Affordable Care Act mandated that insurance companies must cover mental health care as one of the ten essential benefits. That included treatment for alcohol, drug, and other substance abuse and addiction. Patient co-pays could be as high as $40 a session. The number of therapist visits could be limited.


Deinstitutionalization successfully gave more rights to the mentally challenged. Many of those in mental hospitals lived in the backwater for decades. They received varying levels of care. It also changed the culture of treatment from "send them away" to integrate them into society where possible. 

Deinstitutionalization especially benefited those with Down syndrome and other high-functioning mental disorders. 


Many of those released from institutions were severely mentally ill. They were not good candidates for community centers due to the nature of their illnesses. Long-term, in-patient care provides better treatment for many with severe mental illnesses. 

There wasn't enough federal funding for the mental health centers. That meant there weren't enough centers to serve those with mental health needs. It also made it difficult to create any comprehensive programs. Mental health professionals underestimated how difficult it was to coordinate community resources scattered throughout a city for those with disorders.

The courts made it almost impossible to commit anyone against their will. That’s true regardless of whether it was for the person’s own safety and welfare or for that of others. 

How It Affects You

There were 11.4 million people who experienced serious mental illness in 2018. Of those, 64% received treatment for their disease. One reason many don’t is that 13.4% don’t have insurance coverage.

Mental health issues affect the sufferer’s family. At least 8.4 million people provide care to an adult with mental or emotional health issues. They spend around 32 hours a week providing unpaid care.

The cost to society is also large. Around 12 million emergency room visits are due to mental health issues. Mood disorders are the most common reason for hospitalization after pregnancy and birth. Serious mental illness costs $193.2 billion in lost earnings each year.

Those suffering from mental health issues comprise almost 40% of those in prison and 20% of the homeless. Another 40% of Veteran’s Health Administration patients have a mental or behavioral health issue.

If you or someone you love is one of those people, then you know how the state of mental health treatment in the United States affects you.