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The Observatory · Case 54 · Public programs · 1955 to 1999

Deinstitutionalization of mental health care (United States, 1955 to 1999)

Not yet reviewed by a person. This page was researched and written with the help of AI tools. Every key claim is labeled by evidence status near the end, but no person has checked the sources yet. Treat it as a draft.
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Sources checked 2026-10-25. Preliminary research, not a final verdict.

In this packet
1. Review status · 2. The article · 3. Sources and their details · 4. Every link used · 5. Revision history · 6. How to cite

1. Review status

Status: Not yet reviewed by a person. This page was researched and written with the help of AI tools. Every key claim is labeled by evidence status near the end, but no person has checked the sources yet. Treat it as a draft.
Verified by: No one has verified this page yet. No verifier is recorded.
Sources checked: 2026-10-25
Review history: https://michiinstitute.com/members/reviews.html?case=deinstitutionalization
Packet built: 2026-10-28

2. The article

State mental hospital populations fell from about 559,000 in 1955 to under 72,000 by 1994 while community care was promised but unevenly built; links to jails and homelessness are documented associations, not proven causes.

In brief

In 1955 about 559,000 people lived in state and county mental hospitals, the highest count on record. In 1963 President Kennedy called for "a bold new approach" and Congress authorized construction grants for community mental health centers. Medicaid, created in 1965, did not pay for adults aged 21 to 64 in large psychiatric institutions. California's Lanterman-Petris-Short Act narrowed involuntary holds, and in 1999 the Supreme Court held in Olmstead that unjustified isolation of people with disabilities can be discrimination. By 1994 the hospital count was about 72,000. Today large numbers of people in jails report mental health problems, and many people experiencing homelessness need care. These are documented associations. Whether closing hospitals caused them is disputed, and studies cited here point both ways. The record shows that a plan voters could read promised community care, and that those who needed it most were the people least able to testify about what it delivered.

The record

The starting point: large state hospitals

The number of patients in state and county mental hospitals peaked in 1955. Three sources give slightly different counts (see the table below). (Torrey excerpt on PBS Frontline; Congressional Record, Sen. Moynihan, 1999; both opened)
On February 5, 1963, President Kennedy sent Congress a special message on mental illness and mental retardation. It said states "have depended on custodial hospitals and homes," and that "The time has come for a bold new approach." It proposed federal grants for "comprehensive community mental health centers." (American Presidency Project; opened)

Timeline

Date	Event	Source
1955	State and county mental hospital census peaks (about 559,000)	Torrey; Congressional Record
Feb. 5, 1963	Kennedy message to Congress proposing community mental health centers	American Presidency Project
Oct. 31, 1963	Public Law 88-164 approved; Title II authorizes construction grants for community mental health centers ($35 million for fiscal 1965, $50 million for 1966, $65 million for 1967)	GovInfo, 77 Stat. 282
1965	Medicaid's definition of "institution for mental diseases" (IMD) first appears, with a state option for people 65 and older	MACPAC
1967	California's Lanterman-Petris-Short Act (LPS) is in place by this date (year implied by the Disability Rights California page, not stated outright)	Disability Rights California
1972	State option added to cover IMD services for people under 21	MACPAC
1988	Facilities of 16 or fewer beds exempted from the IMD definition	MACPAC
June 22, 1999	Olmstead v. L.C. decided	Justia

Counts of the state hospital population

Item	Figure A	Figure B	Figure C	Notes
1955 census	558,239 (Torrey; he cites U.S. Public Health Service Publication 574, 1956)	558,922 (Sen. Moynihan, Congressional Record)	about 559,000 (New York Times article inserted in the Record)	Differences are under 1 percent; definitions of "state and county" versus "public psychiatric hospitals" may differ. Not reconciled.
Later census	71,619 in 1994 (Torrey; he cites a 1994 federal survey)	61,722 in 1996 (Moynihan)	about 69,000 in 1995 (New York Times piece)	Different years. Reported as different years, not as a contradiction.
Share of beds lost	about 93 percent since 1955 (Torrey and Zdanowicz op-ed, inserted in the Record)	not independently computed here		Attributed claim by advocates of reform of the commitment system

Torrey, a psychiatrist who argues for stronger treatment and commitment laws, also estimates that about 763,391 severely mentally ill people were living in the community in 1994 who would otherwise have been hospitalized. This is his estimate, built from assumptions about population growth. (PBS Frontline excerpt; opened)

Federal law: grants, Medicaid and the IMD exclusion

Public Law 88-164 (October 31, 1963) authorized grants for construction of community mental health centers. The authorization amounts above are for construction. We did not open the later law on staffing grants, and we did not find how many centers were planned or built. (GovInfo, 77 Stat. 282; opened)
Under current law, federal Medicaid matching funds are not available for care for a person "who has not attained 65 years of age and who is a patient in an institution for mental diseases." An IMD is "a hospital, nursing facility, or other institution of more than 16 beds that is primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases." There are exceptions, including inpatient psychiatric services for people under 21. (42 U.S.C. 1396d, Cornell LII; opened)
MACPAC, the congressional Medicaid advisory commission, attributes the exclusion to states' role as the main payer for inpatient behavioral health and a preference for community care. It lists 2016 problems: coverage varies by age, and substance use facilities with more than 16 beds are all IMDs. (MACPAC, The Medicaid IMD Exclusion; opened)
Whether the exclusion in practice pushed states to close hospitals or only froze the system as it was is argued in the literature. We did not open a study that tests this. Unverified.

Courts and states

California's Lanterman-Petris-Short Act limits involuntary holds. As summarized by Disability Rights California, a person cannot be held for mental illness alone; a 72-hour evaluation hold (section 5150), a 14-day treatment hold (5250), and conservatorship for "grave disability" (the person cannot provide food, clothing or shelter because of a mental disorder) follow. Conservatorship requires proof beyond a reasonable doubt and a unanimous jury if requested. The Act's stated aim was to "end the inappropriate, indefinite, and involuntary commitment of persons with mental health disorders." (Disability Rights California; opened. This is an advocacy group's summary; we did not open the statute.)
Olmstead v. L.C., 527 U.S. 581 (June 22, 1999): "Unjustified isolation, we hold, is properly regarded as discrimination based on disability" under Title II of the Americans with Disabilities Act. A state must provide community treatment when its treatment professionals find it appropriate, the person does not object, and it can be reasonably accommodated considering the state's resources and the needs of others. Justice Ginsburg wrote; Part III-B was a plurality of four; Justices Thomas, Scalia and Chief Justice Rehnquist dissented. (Justia; opened, last 14,650 characters not read)

Jails, prisons and homelessness: documented associations

Bureau of Justice Statistics (James and Glaze, 2006), using 2004 prison and 2002 jail surveys: 56% of state prisoners, 45% of federal prisoners and 64% of jail inmates had a "mental health problem," meaning a past diagnosis or treatment, or self-reported symptoms meeting DSM-IV criteria. The report calls the symptom estimates "a baseline indication of mental health problems among inmates rather than a clinical diagnosis." It describes associations (younger, female, substance use, abuse histories, homelessness) and does not claim causes. (BJS; opened)
On whether closing hospitals caused this: advocates say hospital closure sent people to the criminal system; a 2019 paper by Jacobs and Panichelli summarizes the other side, that macro studies find neither hospital closures nor service spending regularly predict arrest rates, that a study by Raphael and Stoll called the relationship "largely spurious," and that symptoms are directly involved in only about 8 to 15 percent of arrests among people with serious mental disorders. Their own data are 23 interviews and not meant to be general. (Deviant Behavior, 2019, PMC7500566; opened, secondhand account of other studies)
Homelessness: HUD counted 771,480 people experiencing homelessness on one night in January 2024, 497,256 sheltered and 274,224 unsheltered; HUD warns the count is a snapshot and may undercount. The portion of that figure with a serious mental illness was not in the pages we opened. (HUD, 2024 AHAR Part 1; opened)

What this case shows

The plan was public, but the promise was bigger than the funding we can document. Kennedy's 1963 message and Public Law 88-164 told voters community centers would replace custodial hospitals. The statute we opened authorized construction money only. People could read the plan; we found no public count of what was built. (American Presidency Project; GovInfo)
A funding rule shaped where care could be paid for. Medicaid since 1965 has not paid for adults aged 21 to 64 in large psychiatric institutions. Voters in a state could decide whether to run hospitals, but a federal rule changed what each choice cost. (42 U.S.C. 1396d; MACPAC)
Individual rights and treatment access pulled in different directions. California's 1967 law narrowed involuntary holds and added hearings. Olmstead held that unjustified isolation can be discrimination, but only when professionals judge community placement appropriate, the person does not object, and resources allow. People with the most severe illness may be both protected and left without a bed. (Disability Rights California; Justia)
Those who bore the cost were often not in the room. Patients, families, jails and local emergency services absorbed the shift. Jails now hold large numbers of people with mental health problems, but the data we opened show association, and the causes remain argued. (BJS; Jacobs and Panichelli)
The numbers themselves are public and still not agreed. The 1955 census appears as 558,239, 558,922 and about 559,000. A decline of roughly 87 percent by 1994 depends on the baseline and on counting hospitals only, not nursing homes, general hospitals or jails. (Torrey; Congressional Record; our calculation from Torrey's figures)

The strongest objections, and our answers

Objection: Deinstitutionalization was a rights reform, not a failure. Kennedy called custodial care a failure; California's Act aimed to end indefinite commitment; Olmstead treats unnecessary institutional segregation as discrimination. Mitigation: We state these aims. We do not call the outcome a failure or a success. We report what the sources document: fewer hospital beds and uneven community care.
Objection: Closing hospitals caused homelessness and jail crowding. Mitigation: Torrey and others argue this. The sources we opened (BJS, HUD) show high rates of mental health problems among inmates and a large homeless count, not a cause. Jacobs and Panichelli summarize studies finding little link. We say "association."
Objection: Torrey is an advocate, so his numbers are suspect. Mitigation: His 1955 count matches Moynihan's within about 700. His estimate of 763,391 people is labeled his estimate.
Objection: California and one Supreme Court case do not describe the whole country. Mitigation: Correct. LPS is one state's law, and other states differ. We use it as an example of a state choice, not a national rule.
Objection: Advocacy and secondary summaries are weak sources. Mitigation: We mark which were advocacy groups (Disability Rights California), which were academic secondary accounts, and which were primary (statutes, opinions, BJS, HUD, Congressional Record).

Open questions: what would change our minds

How many community mental health centers were funded and built, and how much operating money followed. Not opened.
The role of medicines, hospital abuse scandals, state budgets and court cases in the decline. Not opened. Our case does not claim a single cause.
Any study that directly tests whether the Medicaid IMD exclusion changed state hospital closures.
The text of the California statute (Welfare and Institutions Code) was not opened; we relied on an advocacy summary.
The portion of the 2024 homeless count with a serious mental illness. HUD's report had no such figure in the pages we read.
Current-year jail and prison figures. The BJS report uses 2002 and 2004 surveys.
The Olmstead opinion's final section and the dissent were not read.

Sources

Title	Publisher	URL	Supports	Opened?
Out of the Shadows, excerpt (E. Fuller Torrey)	PBS Frontline	https://www.pbs.org/wgbh/pages/frontline/shows/asylums/special/excerpt.html	Census 1955 and 1994, estimate	Yes
Congressional Record, Vol. 145, pp. 15539 to 15541	GovInfo	https://www.govinfo.gov/content/pkg/CRECB-1999-pt11/html/CRECB-1999-pt11-Pg15539-3.htm	558,922 and 61,722	Yes
Special message to Congress on mental illness (Feb. 5, 1963)	American Presidency Project	https://www.presidency.ucsb.edu/documents/special-message-the-congress-mental-illness-and-mental-retardation	Kennedy proposal	Yes
Public Law 88-164, 77 Stat. 282	GovInfo	https://www.govinfo.gov/content/pkg/STATUTE-77/pdf/STATUTE-77-Pg282.pdf	Title II grants	Yes
42 U.S.C. 1396d	Cornell LII	https://www.law.cornell.edu/uscode/text/42/1396d	IMD definition and exclusion	Yes
The Medicaid IMD Exclusion	MACPAC	https://www.macpac.gov/wp-content/uploads/2016/03/The-Medicaid-Institution-for-Mental-Diseases-IMD-Exclusion.pdf	History, rationale	Yes
Understanding the LPS Act	Disability Rights California	https://www.disabilityrightsca.org/node/1104	Holds, due process	Yes
Olmstead v. L.C., 527 U.S. 581 (1999)	Justia	https://supreme.justia.com/cases/federal/us/527/581/	Holding	Yes, mostly
Mental Health Problems of Prison and Jail Inmates (2006)	Bureau of Justice Statistics	https://bjs.ojp.gov/content/pub/pdf/mhppji.pdf	56, 45, 64 percent	Yes
From Criminalized Patients to Risk-Exposed Agents (2019)	Deviant Behavior, via PMC	https://pmc.ncbi.nlm.nih.gov/articles/PMC7500566	Studies on criminalization	Yes
2024 AHAR Part 1	HUD	https://www.huduser.gov/portal/sites/default/files/pdf/2024-AHAR-Part-1.pdf	771,480	Yes

Evidence status and correction history

Key claims

Claim	Status	Source
State and county hospital census peaked in 1955 at about 559,000	Disputed (sources disagree, each figure shown)	558,239 (Torrey); 558,922 (Moynihan, Congressional Record); about 559,000 (NYT, inserted)
Census was 71,619 in 1994	Verified (secondary only)	Torrey excerpt, citing a federal survey
Census was 61,722 in 1996	Verified (primary source opened)	Congressional Record (a senator's statement)
About 93 percent drop in beds since 1955	Verified (secondary only)	Op-ed inserted in Congressional Record; attributed to Torrey and Zdanowicz
763,391 people in the community who would otherwise be hospitalized	Unverified (not confirmed)	Torrey's own estimate; not independently checked
Kennedy message dated Feb. 5, 1963 with "bold new approach"	Verified (primary source opened)	American Presidency Project
P.L. 88-164 approved Oct. 31, 1963; $35, $50, $65 million construction authorizations	Verified (primary source opened)	GovInfo
IMD means more than 16 beds; no federal match for patients under 65 in an IMD	Verified (primary source opened)	42 U.S.C. 1396d
IMD definition first appeared in 1965	Verified (secondary only)	MACPAC
IMD exclusion rationale: states as payer, preference for community care	Verified (secondary only)	MACPAC
LPS holds: 72 hours (5150), 14 days (5250); conservatorship proof beyond a reasonable doubt	Verified (secondary only)	Disability Rights California
LPS enacted 1967	Unverified (not confirmed)	Implied by DRC page; statute not opened
Olmstead decided June 22, 1999; "Unjustified isolation..."	Verified (primary source opened)	Justia
56% state, 45% federal, 64% jail inmates had a mental health problem	Verified (primary source opened)	BJS 2006
771,480 people homeless in Jan. 2024 count	Verified (primary source opened)	HUD AHAR
Hospital closure caused jail growth or homelessness	Disputed (sources disagree, each figure shown)	Advocates (Torrey) versus Raphael and Stoll as cited by Jacobs and Panichelli; no causal figure

Correction history

Date	Change	Reason
2026-10-25	First publication	New case
2026-10-25	No outside research file existed for this case; the assignment's "about 559,000" census was checked and found to appear as 558,239, 558,922 and about 559,000	Primary and secondary sources differ slightly

Found an error or a better source? We keep every correction on the record with its date and reason. Nothing here is quietly rewritten.

3. Sources and their details

One entry per source in the page's Sources table. "Checked" is the date the page says its sources were checked. A Wayback link and SHA-256 appear only where a snapshot has been recorded.

1. Out of the Shadows, excerpt (E. Fuller Torrey)

Publisher: PBS Frontline
Date: not stated in the title; see the source
URL: https://www.pbs.org/wgbh/pages/frontline/shows/asylums/special/excerpt.html
Supports: Census 1955 and 1994, estimate
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

2. Congressional Record, Vol. 145, pp. 15539 to 15541

Publisher: GovInfo
Date: not stated in the title; see the source
URL: https://www.govinfo.gov/content/pkg/CRECB-1999-pt11/html/CRECB-1999-pt11-Pg15539-3.htm
Supports: 558,922 and 61,722
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

3. Special message to Congress on mental illness (Feb. 5, 1963)

Publisher: American Presidency Project
Date: 1963
URL: https://www.presidency.ucsb.edu/documents/special-message-the-congress-mental-illness-and-mental-retardation
Supports: Kennedy proposal
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

4. Public Law 88-164, 77 Stat. 282

Publisher: GovInfo
Date: not stated in the title; see the source
URL: https://www.govinfo.gov/content/pkg/STATUTE-77/pdf/STATUTE-77-Pg282.pdf
Supports: Title II grants
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

5. 42 U.S.C. 1396d

Publisher: Cornell LII
Date: not stated in the title; see the source
URL: https://www.law.cornell.edu/uscode/text/42/1396d
Supports: IMD definition and exclusion
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

6. The Medicaid IMD Exclusion

Publisher: MACPAC
Date: not stated in the title; see the source
URL: https://www.macpac.gov/wp-content/uploads/2016/03/The-Medicaid-Institution-for-Mental-Diseases-IMD-Exclusion.pdf
Supports: History, rationale
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

7. Understanding the LPS Act

Publisher: Disability Rights California
Date: not stated in the title; see the source
URL: https://www.disabilityrightsca.org/node/1104
Supports: Holds, due process
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

8. Olmstead v. L.C., 527 U.S. 581 (1999)

Publisher: Justia
Date: 1999
URL: https://supreme.justia.com/cases/federal/us/527/581/
Supports: Holding
Opened by us: Yes, mostly
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

9. Mental Health Problems of Prison and Jail Inmates (2006)

Publisher: Bureau of Justice Statistics
Date: 2006
URL: https://bjs.ojp.gov/content/pub/pdf/mhppji.pdf
Supports: 56, 45, 64 percent
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

10. From Criminalized Patients to Risk-Exposed Agents (2019)

Publisher: Deviant Behavior, via PMC
Date: 2019
URL: https://pmc.ncbi.nlm.nih.gov/articles/PMC7500566
Supports: Studies on criminalization
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

11. 2024 AHAR Part 1

Publisher: HUD
Date: 2024
URL: https://www.huduser.gov/portal/sites/default/files/pdf/2024-AHAR-Part-1.pdf
Supports: 771,480
Opened by us: Yes
Checked: 2026-10-25
Snapshot: No snapshot or SHA-256 recorded in this packet yet.

4. Every link used in the article

Review history
https://michiinstitute.com/members/reviews.html?case=deinstitutionalization
record
https://www.govinfo.gov/content/pkg/CRECB-1999-pt11/html/CRECB-1999-pt11-Pg15539-3.htm
Torrey excerpt on PBS Frontline
https://www.pbs.org/wgbh/pages/frontline/shows/asylums/special/excerpt.html
American Presidency Project
https://www.presidency.ucsb.edu/documents/special-message-the-congress-mental-illness-and-mental-retardation
GovInfo, 77 Stat. 282
https://www.govinfo.gov/content/pkg/STATUTE-77/pdf/STATUTE-77-Pg282.pdf
42 U.S.C. 1396d, Cornell LII
https://www.law.cornell.edu/uscode/text/42/1396d
MACPAC, The Medicaid IMD Exclusion
https://www.macpac.gov/wp-content/uploads/2016/03/The-Medicaid-Institution-for-Mental-Diseases-IMD-Exclusion.pdf
Disability Rights California
https://www.disabilityrightsca.org/node/1104
Justia
https://supreme.justia.com/cases/federal/us/527/581/
BJS
https://bjs.ojp.gov/content/pub/pdf/mhppji.pdf
Deviant Behavior, 2019, PMC7500566
https://pmc.ncbi.nlm.nih.gov/articles/PMC7500566
HUD, 2024 AHAR Part 1
https://www.huduser.gov/portal/sites/default/files/pdf/2024-AHAR-Part-1.pdf

5. Revision history

First published (earliest change on record): 2026-10-25.

Corrections on the page

Date	Change	Reason
2026-10-25	First publication	New case
2026-10-25	No outside research file existed for this case; the assignment's "about 559,000" census was checked and found to appear as 558,239, 558,922 and about 559,000	Primary and secondary sources differ slightly

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6. How to cite

The Way (Michi Institute). "Deinstitutionalization of mental health care (United States, 1955 to 1999)." Case 54, The Observatory. Sources checked 2026-10-25. Packet built 2026-10-28. https://michiinstitute.com/cases/deinstitutionalization.html

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