I think there's a mixture.
Mental health is much better understood now, and so more diagnoses. That's good.
For example my dd has a diagnosis of anxiety. Often when she's talking about it, I think "oh yes, I feel/felt like that too".
But when I was little I don't think anxiety was a diagnosis at all - dm used to call me "highly-strung".
But the flip side of the diagnosis, and it being understood, is that I can see with my dd, whereas I had to get on and developed strategies to cope, she says "it's my anxiety" and expects a buffer either in not having to do it, or being given more support.
There are times when that support is fantastic and I wish I had had it.
But there are times when I think that if she had to get on, then she'd have developed ways to cope and she would then be able to do more.
When she does push through, she often gains a sense of achievement which is really good for her mentally, and then she is able to do more. But it's often too easy to just say she can't, and then she can start spiralling downwards.
So the diagnosis has in some ways made her less capable and more disabled by having it, because she can hide behind it when she doesn't like the idea of doing something.
But ideally there would be mental health support to help people get through things and learn strategies - and that isn't in place. Dd had emergency counselling with CAHMS once (took 6 months to get it from being told it was urgent and top priority) and went back on the waiting list a year later as non-urgent and didn't get seen in the next 4 years before she dropped off the radar at 18yo. That's how bad the situation is.
There are people that truly need the support - yes, even for things like anxiety when getting out of the house is to hard for them to manage.
But the issue with mental health is it is almost impossible to distinguish between them and the person who decides that's the easier option to working. Someone might look fine when they come out of the house to go to the cinema, but not be fine if they're coming out to work and that is not they being "silly" it is a fact of their life.
In all honesty, there have been times with dd where I didn't know if she was really having a crisis or whether she just didn't want to do something (there were times I knew - both ways!). And if I, as her parent who knew her well, couldn't tell - then what hope is there for someone who has to make a decision on seeing them for perhaps an hour a week.
But the sad thing is that with people trying it on, it's ultimately the people who genuinely struggle who will probably be the biggest group to lose out, because the former group will put their energies into finding a different way of being supported.