Historical Overview

The end of the institutional era in psychiatry (the transition from Period 1 to Period 2 proposed by the authors of this book) arrived later in the USA than in northern Europe. While Britain, Norway and the Netherlands were experimenting successfully with the therapeutic community, open-door hospitals, early discharge, and other forms of institutional reform in the early 1950s, in the USA people with psychosis generally were still locked away in archaic asylums. Only after the antipsychotic drugs and Medicaid health insurance for the indigent were introduced in the middle of the 1950s did deinstitutionalisation take off in America, and, even then, it was primarily effected by transferring people with psychotic illness from hospital to such ‘community’ facilities as nursing homes and massive boarding homes where treatment was often inadequate or non-existent (Warner, 1994).

Medicaid is a health insurance programme funded jointly by the federal and state governments which covers treatment of recipients with mental illness in the community but not in free-standing psychiatric hospitals. State hospitals, are entirely supported by the state budget. This arrangement created an unusual fiscal incentive for state governments to transfer patients out of state hospitals to access federal funding, and promoted radical deinstitutionalisation policies. The elimination of public psychiatric beds, after the advent of Medicaid, progressed further and faster in the USA than anywhere else in the world at that time.