1. What percentage of Americans are or have been mentally ill? Furthermore, are we over-diagnosing /prescribing medication for mental illness in America? We can't really know that seeing as how we don't have the stats, sample size, etc etc. The article mentioned 1 in 4 people have some sort of mental illness at one point in their life and that seems to echo other numbers I've heard before. As far as over-diagnosing/prescribing, if you take prescribing for ADHD out, I'd say no. In fact, the article suggests that most people don't seek treatment.
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Nevertheless, the survey found that a large number of people never seek treatment.
2. Should tax-payers pay for such studies? Well, seeing as how this study is conducted once every 10 years, I think we can swing that

IF you look at it long term, and try and "nip things in the bud" as these doctors are trying to do, it may actually end up saving us.
3. What is the actual useful application of such information? From the article:
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He said the study underscores the need for early detection and treatment.
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to assess the mental health of the country.
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The survey is the first to look at the frequency of seriously debilitating mental illness, defined as one that substantially interferes with a person's ability to function in normal roles. It found that about 6 percent of adults meet the criteria in any given year, which is comparable to rates of heart disease and cancer.
and probably the most important part:
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"We need to do a better job of figuring out which mild and moderate disorders are likely to become seriously debilitating in the future and which ones are self-limiting," Kessler said. "There's a lot of potential for working with early onset cases and doing early intervention to try to nip things in the bud."
Sounds to me like they're trying to find which of these mild disorders may lead to a greater chance of a debilitating disorder, alcoholism, stress induced heart problems, drug use etc etc. I don't think they're looking at the "cause" here, they're trying to narrow things down and find out which disorders have the most potential to effect Americans and or which disorders have the most potential to lead to greater problems later in life.