President John F. Kennedy had a special interest in the issue of mental health because his sister, Rosemary, had incurred brain damage after being lobotomised at the age of 23. His administration sponsored the successful passage of the Community Mental Health Act, one of the most important laws that led to deinstitutionalization. The movement continued to gain momentum during the Civil Rights Movement. The 1965 amendments to Social Security shifted about 50% of the mental health care costs from states to the federal government, motivating state governments to promote deinstitutionalization. The 1970s saw the founding of several advocacy groups, including Liberation of Mental Patients, Project Release, Insane Liberation Front, and the National Alliance on Mental Illness (NAMI).
The lawsuits these activist groups filed led to some key court rulings in the 1970s that increased the rights of patients. In 1973, a federal district court ruled in Souder v. Brennan that whenever patients in mental health institutions performed activity that conferred an economic benefit to an institution, they had to be considered employees and paid the minimum wage required by the Fair Labor Standards Act of 1938. Following this ruling, institutional peonage was outlawed. In the 1975 ruling O’Connor v. Donaldson , the U.S. Supreme Court restricted the rights of states to incarcerate someone who was not violent. This was followed up with the 1978 ruling Addington v. Texas , further restricting states from confining anyone involuntarily for mental illness. In 1975, the United States Court of Appeals for the First Circuit ruled in favour of the Mental Patient’s Liberation Front in Rogers v. Okin , establishing the right of a patient to refuse treatment. Later reforms included the Mental Health Parity Act, which required health insurers to give mental health patients equal coverage.