During his time leading the division, Kolb also developed psychiatric treatment centers for merchant seamen, established a mental health screening program at the U.S. Coast Guard Academy, and set up public health training programs for mental health personnel. During 1939-1940 he collected data from public health and law enforcement officials in all forty-eight states as part of a study of alcoholism as a public health problem, for a Research Council on Problems of Alcohol symposium.

Kolb's most significant achievement during this period was drafting a bill for a national neuropsychiatric institute, using the recently established National Cancer Institute as a model. Kolb's 1939 draft plan emphasized the need for expanded research on nervous and mental diseases, and called for a research center within the Public Health Service. The center would include extensive laboratories and hospital space for 150 patients. Surgeon General Thomas Parran approved Kolb's plan wholeheartedly. Kolb then sought the backing of the medical profession and voluntary health organizations to help move the bill through Congress. By 1940, the National Committee for Mental Hygiene, American Psychiatric Association, American Neurologic Association, and the AMA Section on Nervous and Mental Diseases had endorsed the plan. But the AMA House of Delegates refused to back it, perhaps fearing the encroachment of "state medicine." Kolb's proposal was shelved when American entered World War II in 1941.

However, as historian Jeanne Brand has detailed, the war provided a forceful wake-up call regarding mental health: Over a million men were rejected for military service due to nervous and mental diseases, and forty percent of medical discharges were for psychiatric conditions. The war experience also exposed "a severe shortage of trained psychiatric personnel, lack of sound knowledge on the etiology of mental illness, lack of adequate methods for dealing with large numbers of psychiatric cases, and lack of both civilian and military understanding of the role of psychiatry in the prevention and treatment of mental illness…" On the home front, wartime personnel shortages affected state mental institutions, where care was already marginal. Some of the conscientious objectors who did their national service in state hospitals, appalled by the neglect and overcrowding they witnessed, wrote about the dismal conditions, raising public awareness. Journalists such as Albert Deutsch and Mike Gorman followed up on these stories and kept them in the public eye.

Kolb retired from the PHS in 1945, but his successor, Robert Felix, used Kolb's template to draft a new proposal for a national neuropsychiatric institute as the war was ending, and guided it through Congress. The National Mental Health Act passed in 1945, and the National Institute of Mental Health was established as part of NIH in 1949, with Felix as its first director. NIMH was the sixth of ten new institutes created after WWII, a reflection of unprecedented public and congressional support for expanding the government's role in public health and medical research. [See the John E. Fogarty Profiles in Science collection.]