The biggest issue with all policies is the same with red flag laws - and even attempted mention of potentially having an issue grounds you and you lose your job; this makes the issue that much worse.
Yes. This is dangerous because pilots are afraid to disclose depression, anxiety and other mental health conditions for fear of losing their livelihood. For example, the FAA automatically considers an ADHD diagnosis disqualifying for airline pilots: https://pilot-protection-services.aopa.org/news/2018/februar....
This results in a “don’t ask don’t tell” situation which can be even worse.