Broadly speaking, what have over the years been called bedlams, insane asylums or mental hospitals (or a variety of other less salubrious terms) - places to house people with serious mental health issues - have always been problematic. The ideal of proper care for people with mental health issues is quite labour intensive and relies on the environment of the mental hospital being nice - being a place of healing. People with mental health issues simply don't get better in a place that is stressful. And the more people are packed into the environment of the mental hospital, the more stressful it is - the more people screaming and shrieking, the more people who you have to watch because they might hurt you, the less attention you get from staff, etc etc. So the people running the mental hospitals have a very fine line to balance on in terms of housing as many people as possible - to not go bankrupt - and actually being a place of healing.

You can see a previous comment of mine here talking about the rise of mental asylums in the 19th century; part of why there was this rise was that people were convinced that conditions for those inside the asylums had improved. They actually had improved somewhat, but the demand for those hospitals led to them becoming packed, and thus conditions deteriorated. Understanding of mental conditions improved somewhat in the early to mid 20th century, but the basic issues of mental asylums stayed the same.

There were a some changes to how mental health was treated and discussed from the 1950s to 1970s which made mental asylums as they were seem particularly outdated. Firstly, and most obviously, there was the rise of psychiatric medicine, with drugs going on the market which had some success treating issues like anxiety, depression, schizophrenia, and bipolar/manic depression (though which are not magic bullets, by any means). This meant that a fair few of the people who might have otherwise been sent to a mental asylum were spared from that fate, because the medicine could, at least, reduce the frequency of their symptoms to an extent.

Secondly, in the 1950s and 1960s, there was a movement within psychology and psychiatry which we broadly called 'humanistic psychology', which in general tried to make clinical practice as client-centered as possible. The humanistic psychologists saw patients not as patients but as clients. A humanistic psychologist like Carl Rogers argued that treatment should be as judgement-free and undirective as possible, and was simply based around letting the patient talk and mirroring back to them what they said in a calm, warm atmosphere (if you've heard of Eliza, the early computer psychotherapist, Eliza was set up as a mock Rogerian therapist). Additionally, the psychiatrist Thomas Szasz prominently argued that the delusions and beliefs of schizophrenics had important clues for the therapist in understanding how they saw the world and thus how to treat them, and were not simply gibberish; Szasz played a role in removing some of the stigma in schizophrenia and making it seem more human and less like someone being possessed. The idea of simply hiding away the mentally ill in asylums where they were unlikely to be released for many years now seemed retrograde.

Additionally, in the 1960s, there was a sort of increased awareness of the political aspects of 'madness'; some of Foucault's history of madness - which saw madness as socially constructed - was published in English in 1964 as Madness And Civilisation, and subcultures like the hippies, which challenged mainstream ideas of proper behaviour, began to make a mark. Ken Kesey's book One Flew Over A Cuckoo's Nest, published in 1962, was also influential for a variety of reasons; it was based on Kesey's experiences working as night staff at a mental hospital, and Kesey rapidly became famous not only for the book but for his membership in the Merry Pranksters, a group of former beats (including Neal Cassady, who was the model for Dean Moriarty in Kerouac's On The Road) which was hugely influential on the hippie movement and profiled in Tom Wolfe's The Electric Kool-Aid Acid Test.

All of this - along with several scandals related to mental hospitals in the 1950s - set up the conditions that led to the deinstitutionalisation of American mental hospitals; in 1955, about three quarters of mental health care was provided in in-patient mental facilities (i.e., mental hospitals), while a quarter was provided to out-patients (i.e., people going to a psychiatrist appointment). By 1975 this had reversed - only a quarter of mental health care was in-patient (the amount of people in mental hospitals in the USA had decreased from about 560,000 people to about 160,000). President Kennedy in 1961 had announced an aim to transfer care for mentally ill people to community mental health centres, and the passing of Medicare and Medicaid in the USA in 1965 provided policy incentives to move people away from mental hospitals (and the American states that administered them were only too happy to stop spending oodles of money on mental hospitals, and often did not fund the community mental health centres to the same extent). By the 1970s (and with the release of the One Flew Over A Cuckoo's Nest film based on the Ken Kesey book, starring Jack Nicholson increasing public understanding of conditions in mental hospitals), Supreme Court rulings made it increasingly more difficult to house people in mental hospitals against their will.

In general, this movement away from mental hospitals as a policy objective (which also occurred, generally, in other countries around the world) has been a good thing. It means that the people who were placed in mental hospitals after the deinstutitionalisation movement ran its course (yes, they still exist) are more likely there for their own good, to keep them from harming themselves - acute episodes of 'positive' schizophrenia symptoms, for example. And it means that people can receive mental health care in the context of their lives, which leads to genuine improvement. However, there are also a bunch of major issues associated with it, most notably the segment of the homeless population that are likely to have schizophrenia, who the community mental health system has failed.

However, given the events that motivate your questions, I should also point out that research suggests that levels of gun violence in the population of those with mental illness is not particularly different from that in the general population and that there's no real correlation between diagnosed mental illness and mass shootings - whatever causes these mass shootings rarely seems to be the kind of medical condition that would have seen someone involuntarily committed back in the day.