It’s a classic move by totalitarian states, Fascist Italy and the Soviet Union used the same tactic (North Korea continues to use it). And unfortunately it was pretty effective. No one really believed the people shut away were actually crazy, but they sure were scared of being disappeared to an “asylum”, “psychiatric facility”, or “reeducation camp”.

This is literally how the soviet union suppressed dissent in the 80s. Disagreement with the party was legally considered a sign of psychological issues. They did this to replace the gulags.