Factual error: The bullet removed from Cole's leg is totally undamaged. Even a full metal jacket bullet will be squashed when it hits a person's leg (and stops inside the leg).
Factual error: In the beginning, James is collecting insects but it is cold enough for snow. Insects don't stay exposed to the cold like that.
Factual error: In the madhouse scene where Brad Pitt is jumping on beds and ripping up pillows, feathers are strewn about. Feather pillows are never used in secure facilities, for sanitary and allergic reasons.
Answer: It is meant to draw similarities between the treatment of the mentally ill and convicted felons. Quite often, even today, the mentally ill are housed and treated in facilities that are little better (for quality of life or prospects of rehabilitation) than prisons.