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Why were mental hospitals closed in the United States?

During the second half of the twentieth century the United States dismantled most of its large, state-run psychiatric hospitals. No single edict “closed” them; rather, multiple forces converged over four decades, making institutional care appear unnecessary, undesirable, and economically untenable.

Medical advances that made long-term institutionalization seem obsolete
• In 1954 chlorpromazine (Thorazine) became the first widely used antipsychotic, followed quickly by lithium and other psychotropics.
• These medications reduced the overt symptoms that had often made continuous supervision essential; clinicians and policy-makers began to argue that many patients could live “in the community” if they took their medicines.
• The new treatments dovetailed with a broader therapeutic optimism that people with severe mental illness could recover or at least stabilize outside hospital walls.
Exposure of poor conditions and a growing civil-rights ethos
• Investigations in the 1940s-60s (e.g., Life magazine’s “Bedlam 1946,” Albert Deutsch’s book The Shame of the States, and later Geraldo Rivera’s televised exposé of Willowbrook) showed overcrowding, abuse, and neglect.
• The broader civil-rights movement influenced advocates to frame institutionalization as a deprivation of liberty. A new patients’-rights bar emerged, filing class-action suits arguing that confinement without adequate treatment was unconstitutional.
• Landmark court cases:
– Wyatt v. Stickney (1971) established a constitutional “right to treatment” and minimum staffing standards that many hospitals could not meet.
– O’Connor v. Donaldson (1975) held that a non-dangerous person with mental illness could not be confined against his will if he could survive safely in the community.
– Later, Olmstead v. L.C. (1999) interpreted the Americans with Disabilities Act to require placement in the “least restrictive setting.”
Federal legislation that redirected money away from state hospitals
• Community Mental Health Centers Act of 1963 (signed by President Kennedy) offered 63 % federal matching funds for outpatient clinics, day programs, and residential halfway houses—new services meant to replace, not augment, hospitals.
• Medicare and Medicaid (1965) paid for general-hospital psychiatric units and community services but—because of the “IMD exclusion”—did not reimburse care in state psychiatric institutions with more than 16 beds for adults aged 21-64. States thus could shift costs to the federal government only by moving patients out of their own hospitals.
• Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI), created/expanded in the early 1970s, furnished living stipends to disabled persons in the community, further incentivizing discharge.
State-level fiscal pressures
• State hospitals were expensive to run, especially once new court-ordered staffing ratios were imposed.
• Governors and legislatures discovered they could realize large, immediate savings by closing wards or entire facilities and selling valuable real estate.
• By shifting former inpatients onto Medicaid, SSI, and locally run programs, states transferred much of the long-term cost to federal and county budgets.
Ideological and professional shifts in the mental-health field
• The “community psychiatry” movement argued that hospitals themselves fostered chronic disability (“institutionalism”) and social isolation.
• Recovery-oriented and psychosocial rehabilitation models stressed skills training, supported employment, and housing over custodial care.
• Disability-rights activists promoted the principle that people with mental illness should live and work alongside other citizens, with supports as necessary.
Political consensus across party lines
• Liberals embraced deinstitutionalization as a civil-rights reform; conservatives welcomed the prospect of smaller government and lower state spending.
• Few influential constituencies defended the large hospitals, whose residents—often impoverished, disenfranchised, and far from population centers—had little political voice.

Consequences and unfinished business
Between 1955 and 2016 the number of public psychiatric beds fell from about 560,000 to fewer than 40,000, even as the US population more than doubled. Many people did benefit—able to live with families, in group homes, or independently—but many others ended up homeless, cycling through emergency rooms, or incarcerated. The community-based system envisioned in the 1960s was never fully funded or coordinated, leaving persistent service gaps. Nonetheless, the combined medical, legal, fiscal, and ideological factors above explain why the United States closed most of its mental hospitals and replaced them—partially and unevenly—with community alternatives.