teddy/andrew is actually somewhat psycho..and yes he killed his wife to “help her” after she killed their kids (she asked him to). n after that he just kept on making up his identity/stories to forget that she killed the kids, because he loves her a lot, and he thinks its his fault that the kids died…since he didn’t get his wife any help when she complained.
anyway in the end… he had to get lobotomy/die as the role play treatment didn’t really work out (or did it?)… but either way, andrew was actually sane in the last moment. he decided to go with the men and pretended that he was still teddy so he can “die as a good man” …instead of dying as the psycho patient andrew cuz he just can’t face the facts

thats how i interpreted the movie when i watched it anyways