I seem to recall it was in reference to a practice in early insane asylums in which the attendants would put some of their patients in baskets because they were so far gone that a basket was good enough as far as “accomodations” were concerned.
I tried Word Detective to no avail and Googled the term and got back nothing but Green Day lyrics, a bad series of horror films, and a whole slew of cutsey on-line gift basket sellers.
From the “baskets” (enclosed stretchers) used to carry battlefield casualties to the nearest army hospital.
I should add that “basket case” originally meant any person seriously disabled by combat injuries.
Here’s the entry on [Dictionary.com](http://dictionary.reference.com/search?q=basket case):
Um. Sure I guess I could have looked in a dictionary, but that’s WAY too obvious.
:smack:
Thanks for quenching my curiosity.
Figure 3-27 on this page shows a basket stretcher.
I always reserve the use of ‘basket case’, almost out of respect for the people who are/were actual basket cases. After watching the real “China Beach”, in which a China Beach nurse decribed what a basket case really was:
A patient who had lost both arms and both legs. She elaborated to say the worst basket case she nursed had no arms, no legs (as defined), and was blind and deaf from his injuries.
I don’t use ‘basket case’ even in slang anymore. Just doesn’t seem right.
War is heck. 
A fictional account is presented in Dalton Trumbo’s Johnny Got His Gun, incidentally.
There is a much less grim modern meaning for the phrase. When the owner of a machine takes it apart, realizes he can’t fix it, and brings a mechanic a basket of parts, that’s a modern basket case. The mechanic doesn’t know what was originally wrong, nor does he know if he has all the parts. Mechanics hate jobs like that.
From April of last year http://boards.straightdope.com/sdmb/showthread.php?t=311721&highlight=basket+case
I have heard it referred to (perhaps only as an erroneous or fairly modern morphing of the meaning) as referring to psychiatric patients; apparently Basket Factory is a euphemism for some kind of asylum or psychiatric unit - basket weaving being a typical ‘therapuetic’ pastime (or perhaps in days gone by, a source of income for the asylum). Thus a ‘Basket Case’ would be a person who belongs in the Basket Factory.
Please note: I am not offering this as a competing root etymology; only mentioning a form of usage I have observed.