Spurred by investigations into abuse, growing awareness of the state of mental asylums, and the federal deinstitutionalization push under President John F. Kennedy, the state began to shut down its public institutions over the turn of the twenty-first century. Local citizens also played a key role in advocating for deinstitutionalization. In the 1950s, the Waterbury Hospital participated in the Vermont Project, a research project on rehabilitating schizophrenic patients. The introduction of new tranquilizing drugs in 1954 also helped improve recovery and release rates.

By the end, the institutional system was likened to a “dumping ground” and “warehouses” that cost the state excessive amounts for very poor results. The Reform School closed in 1979 after more than a decade of legislative action and study. Following a lawsuit from four residents (which resulted in the Brace Decree) and various court orders, the Brandon School closed in 1993. The Waterbury Hospital was shut down in 2011 following de-certifications, skyrocketing costs, widespread discharges, and unfavorable reports. 

While it took away one of the integral tools of eugenics—institutional segregation—and strengthened individual determination in regards to medical treatment, deinstitutionalization ultimately failed to fully address the issue of mental health care. The federal government limited the use of funding for long-term care while failing to properly set up the new support systems. Provisions in Medicaid, Medicare, and Supplemental Security Income programs largely prohibited funds for long-term mental care institutions. The prison system soon became a leading provider of mental health treatment while new assisted living facilities soon faced allegations of abuse. Today, local and state governments continue to grapple with lack of treatment for mental health, physical health, and problems such as addiction.