Swiss bank clerk Robert Walser was schizophrenic and spent a quarter of his life in an asylum. [So he's a good fit for TDPRI!] He's often compared to Franz Kafka, another great short story writer. I recommend Walser's "The Walk", which again is long enough to be called a novella.
Just thought of another fave. Richard Wright’s “Almos’ a Man,” sometimes titled in anthologies as “The Man Who Was Almost a Man.” I’d classify it as a naturalist work, and it is a perfect short story, really, by a widely acknowledged, but probably critically underrated, writer. One of my favorite stories to teach my students. So much to evaluate from a variety of perspectives. Essentially it is about race, like everything Wright wrote, but it works in that vein so subtly. In addition to a panoply of historical race issues in America, it is great for having teens explore decision-making, character motivation and development, societal power structures and mobility, and overall story structure, and more. A brilliant, masterfully executed story.