This week's issue of Psychiatric News has several articles on treating demoralization in medical patients dealing with significant illness.
One suggestion given in the article is:
Normalize the patient's distress. State to the patient, "I do not believe that you have a psychiatric disorder. You are someone coping normally with a hard situation. Almost anyone would feel as badly as you are feeling in this situation."
It makes it kind of hard for a consultant psychiatrist (or any psychiatrist) to bill for his services if he doesn't give the patient a psychiatric diagnosis. This leads to overdiagnosis and pathologization of normal human conditions.