Mike Ervin is a disability rights activist who has a monthly column in The Progressive magazine where he discusses disability issues, a subject that gets little attention in most mass media. He also writes a blog Smart Ass Cripple.
In the October/November 2024 issue of the magazine, he describes how private equity companies have entered the business of selling and servicing motorized wheelchairs. Two such companies Numotion and National Seating & Mobility (NSM) are owned by private equity firms and they have gobbled up a lot of the other companies.
A report “Private Equity in Durable Medical Equipment” put out the Private Equity Stakeholder Project (PESP) and the National Disability Rights Network, describes “How Private Equity Profits Off of Disabled and Chronically Ill Americans” and the frustrations that users face when their motorized wheelchairs break down and it takes weeks, even months, to get them repaired. It should be obvious that the deprivation of such an essential part of their lives, for even a day or two, causes immense hardship.
Ervin explains what is going on
Let me pause here to make sure everyone understands the obvious: The only reason private equity firms invest in anything is because they see it as a means of making a lot of money fast. That’s why these firms exist in the first place. If people get hurt in the process (such as employees losing their jobs or customers receiving increasingly lousy service), too bad; that’s just the way the capitalist cookie crumbles.
…The report says that both companies, created through a series of acquisitions and mergers, have “gobbled up competitors and achieved dominant positions in the market.” Numotion was created by a merger of two smaller companies in 2013, and since then, it has acquired at least twenty-five of its competitors. Since a private equity firm bought NSM in 2013 (it’s owned by a different one now), it has acquired at least forty-two other companies, the report says.
With its “laser focus on boosting profits at all costs,” private equity “creates many of the problems for consumers through its own cost-cutting policies. People who rely on DME [durable medical equipment] should not pay the price for private equity’s gamble,” the report adds.
DME includes far more than just wheelchairs. Other essential tools that people with disabilities and chronic health conditions rely upon include walkers, infusion pumps, oxygen equipment, hospital beds, and sleep apnea equipment. At least fifty DME companies are owned by private equity firms, according to the report.
When you allow greedy private equity companies, whose sole goal is to make as much money as quickly as possible for their investors, into the health care field, the needs of the disabled people whom they are supposed to serve get shunted aside. Private equity firms should have no place in any program that provides vital services to people and the US Department’s Antitrust Division, the Federal Trade Commission, and the Department of Health and Human Services have started looking into this.
While strong government regulations can mitigate some of the harshest effects, stories like this should be compelling arguments for why basic health care services should be government-run and funded.
Capitalism only really works when it’s well regulated. I think it’s different people but we seem to be getting similar activities and similar results in other areas as well. I’m pretty sure almost everyone gets stuck dealing with this in one way or another. For me it’s the housing market. I don’t want to detract from this topic, I just think focusing on fixing just one area of this might be more of a band-aid than a solution. We’ll probably be stuck dealing with similar messes until sensible regulations about what equity firms can get involved with is written up. Or there’s a massive power shift back to working people and away from oligarchs.
The profit motive and health care are a toxic mixture. A study (Tanne, BrMedJournal. 2002 Jun 8; 324(7350): 1351) showed that patients treated at for-profit hospitals had higher mortality than those treated at non-profits. Another (Devereaux, JAMA 2002 88(19):2449-57) showed higher mortality at for-profit dialysis centers than at non-profits.
If you have low blood pressure you can read Cory Doctorow on this topic
https://pluralistic.net/2024/02/28/5000-bats/
https://pluralistic.net/tag/private-equity/
[indirect]
It is obvious to me that, ceteris paribus, a (genuine) non-profit will be more efficient than a for-profit one, since all that profit can be reinvested in the business instead of being siphoned-off to investors.
The generic argument at hand is that Government enterprises are more wasteful than privately-run ones, but that’s only true if either/or/and the former enterprises are run less efficiently or competently, which they need not be. Notably, accounting for externalities is not a loss of efficiency.
(cf. https://carbonpricingdashboard.worldbank.org/what-carbon-pricing as an example)
A bit mired in C20 thinking, to my mind.
—
Obviously, I concur with the thesis at hand.
The basic needs of a population should not be run on a for-profit basis, unless one cannot control the public sector.
[PS …or employee welfare considerations, though there may be a vast labour pool at hand]
The requirement for regulation is a sliding scale where basic needs of all citizens should be regulated at a high level, but as commodities and services become less of a need and more of a want regulation levels can decrease.
Food, water, electricity, shelter, health case, waste services, and more increasingly communications (phone/internet) should be pretty tightly regulated for health and safety as well as for prices of basic needs. Both caviar and bread should be free of contaminants and disease. But let caviar prices fluctuate with the market, while bread should be affordable to all. There will certainly be arguments over what is a luxury and what is a necessity, but we could agree on this as a general principle.
But managing capitalism will take more than just regulations. That would rapidly become a game of whack-a-mole. As a regulation was added to one industry loop-holes in other areas would be found. What needs to happen is to establish a disincentive to collect large amounts of wealth in the first place. Famously, one SF author in the 1950’s suggested that all money be made of uranium-238 coins, so that if anyone collected enough of it in one place the whole shebang would, in fact, bang.
That is obviously a satirical suggestion, but the idea behind it has merit. Society must create reasons to reduce the desire in individuals to hoard money which would be better for the economy (and all the people in society) if it was in circulation.
There are a lot of suggestions, but my own hobby-horse (and I expect people who have heard this before will give a little groan), is a high top marginal tax bracket. It worked before, in the 1950’s, so let’s try it again. It won’t stop all greed, but if 90 cents of every dollar a person acquired as income (I won’t say earned) over, say $4,000,000, was required to be given to the government, a lot of people wouldn’t want an income higher than that level. People can still get rich, if I was getting compensated at a rate of $4,000,000/year I’d run out of things to spend it on after the first year and it would just accumulate. But it would create a disincentive to accumulate as such a rate where other functions of the owned business suffer. Extra money would, like it was in the 1950’s, be invested in improving the quality of the service rather than pillaging it.
flex @6: I totally agree that high marginal tax rates would be a good thing; but I think the notion that income higher than some amount is useless misses the point since that’s already the case for the wealthiest.
Why do the top x-percenters oppose limiting their accumulation of wealth? I’ve decided that it’s because they don’t care about absolute wealth, but about relative wealth: they want to be richer that you and me. I think it’s their only source of self-esteem since they tend to be inheritance brats inclusive-or con artists and so have never acquired any actual skills.
There are a couple of naive assumptions here.
First, that the wealth of the top 0.1% (or whatever) is accumulated in the form of income, per se. Which is to say, the idea that many/any of them are somehow “paid” four million dollars a year. I know a few people who are seriously rich, and their “income” is considerably less than mine. However, they OWN stuff, in one case a business that’s an asset in itself, in another case a whole bunch of houses, and in another just a load of what I think of as shares, but which are likely something more esoteric. The point is, they’re all, as far as the taxman is concerned, “earning” less than me… but they’ve GOT more than I can conceive of. And the very having of all that greases the wheels of their lives on its own.
This leads into another assumption: that their wealth exists as money which “which would be better […]in circulation”. It’s not. They’re not Scrooge McDuck, with a cellar full of gold coins or even anything so crude as a bank account with a big number that shows up when they check their balance. (And even if they were so daft as to hoard their money in a current account, it would still be “in circulation” even if they didn’t spend it. That’s how banking works.)
The more you actually come into contact with these people the more you realise a lot of their “wealth”, while in one sense very real, is also pretty much imaginary… it’s just that it’s a dream shared by their bank.
Elon Musk, for example, is commonly held to be the richest man in the world, and estimates of his “worth” vary widely. Why so? Surely, if the naive assumptions above are true, one could simply look at his bank account and say “ah, yeah, $250b. $251b… $252b… (what with interest being a thing -- “richer than gravity”*…). But so much of what we take to be what the odious twerp is “worth” is the value placed on the various businesses he owns… and what does that even mean? What’s my car worth? To me, far more than you’d pay me for it, I suspect. What’s Twitter worth… and is that the figure people use when they calculate his worth?
What this is all coming round to saying is… taxing the rich is HARD, because when you get there you can largely stop working on real things like most of us do (designing chemical plants, immunizing kids, teaching physics, whatever) and spend your non-free time working out ways to avoid tax… or more likely simply paying someone else to tell you how to avoid tax. It’s a legit thing to do -- avoiding tax is a perfectly reasonable thing to do. Anyone in the UK who has an ISA is avoiding tax.
I want the rich taxed, but taxed in a way that works and doesn’t make them scarper. And the interesting thing is, it seems despite all the right wing press alarmism, actual studies suggest that the idea the rich will flee if you tax them is bollocks. Sure, some will go somewhere else… but to them I say “don’t let the door hit your ass on the way out”. The fact is, it seems, that the majority will simply shrug and pay up, because you know what? They like it here. So tax the bastards. Here in the UK we’ve a Labour government now, so hopefully they can get started…
*Standup comedian RIch Hall coined this in relation to Bill Gates…
https://www.facebook.com/watch/?v=350100499577177
Though the topic is about enterprises and public services, sonofrojblake says (among other things)
This is an easily rebutted claim: he bought Twitter for $44B.
That’s what it means. It is not imaginary wealth.
American capitalism is founded upon the exploitation of human suffering.
“But the man who, having far surpassed the limits of providing for the wants, both of body and mind, of himself and of those depending upon him, then piles up a great fortune, for the acquisition or retention of which he returns no corresponding benefit to the nation as a whole, should himself be made to feel that, so far from being a desirable, he is an unworthy citizen of the community; that he is to be neither admired nor envied; that his right-thinking fellow countrymen put him low in the scale of citizenship, and leave him to be consoled by the admiration of those whose level of purpose is even lower than his own.”
Theodore Roosevelt, Address at the Sorbonne in Paris, France: “Citizenship in a Republic”, April 23, 1910
@8, sonofrojblake,
Well, there are actually quite a few more assumptions than just the two you mention, and I’m aware of them (or at least I think I am). The problem of the power of already accumulated wealth, which means individual income can be minimal, is a much harder problem, as you state. You cannot eliminate today’s oligarchs by taxing income, they have gone beyond that. However, there are other options which could be employed, like considering money borrowed against assets as income. That’s an accounting rule change and there is no reason GAAP cannot be adjusted.
As for the mercurial nature of wealth, that is also real problem. Value is arbitrary. We consider Musk to be the richest person in the world because we as a society give certain businesses a high level of value. Since Musk owns a large percentage of those businesses we say he has a great deal of wealth. If we as a society decide that those businesses are valueless, his wealth plummets. He might still be a very wealthy man, but he would no longer be the wealthiest.
How much is a Picasso worth? As much as someone is willing to pay for it. A wealth tax is unworkable because as soon as an assessment is made on the value of something, the wealthy will claim that the value has dropped. There will be court cases tied up for years arguing whether that Picasso is worth $2M or $500K, and during that time the government would never get a cent of revenue. I’ve been at assessing boards of review where a homeowner who purchased their property six months ago argued that the assessed value of their property was too high. Making this argument so that they could get a lower property tax. The question the board of review asked was, “if the property was not worth what you paid for it, why did you buy it?” If real property has been held for more than 10 years, it is very difficult to reach a consensus on value until it is sold, and a lot of wealthy people don’t want to sell their things. And why should we ask them to? The best assessment of the value of an item may be it’s insured value. So expect that if a wealth tax is put in place the insured value of a lot of things will drop. That Picasso? It’s no longer insured, it’s value is zero because we don’t want to be taxed on it. If it burns we don’t care. I’m not saying a wealth tax is impossible, but it’s a very, very hard nut to crack without going to full-on socialism. I’m not advocating for or against socialism, only that the only easy solution to eliminate wealth is if the state owns everything. (Humanity has attempted that in the past and it hasn’t worked out all that well. I think Orwell wrote a book about it.)
There is another issue, which I rarely see discussed, is that should the amount of wealth currently controlled by the rich be dumped into the economy, there would be massive inflation. In fact, there is a good economics argument to be made that the low level of inflation we have seen until recently was caused by the creation of oligarchs. That is, with the oligarchs sucking up excess money for the past forty years the actual circulating money has grown at only a slow rate, keeping inflation low. The problem with that is that as the sovereign powers continues to issue additional money to meet the needs of the economy (and thus increasing wealth of the oligarchy) the rest of society will be seeing a shortage of money. You would expect that as incomes drop, demand would drop and prices will fall. But that doesn’t happen because debt is so easy to acquire. (This is assuming there isn’t a price floor where no one would produce a good because it costs more to make it than they would get by selling it. These do exist, and they are quite scary to contemplate because one of the first thing which happens is widespread starvation.) Ideally there would be a happy medium where the money supply would equal the need, but as opportunities exist to sequester money from circulation, more money needs to be added, which is then sequestered, and so on. There is a reason why economics is called the dismal science.
But, even with the above problems, one thing which did work in the past and could work again is a high top marginal tax rate. While wealth is difficult to measure, income is straightforward. Income can be easily measured and taxes can be taken from it as it is distributed. It wouldn’t be perfect, but we shouldn’t let the perfect get in the way of the good. Finally, we saw the greatest economic expansion in the USA, and the greatest uplift out of poverty, and the greatest expansion of the middle class during the 1950’s when there was a 90% tax on income in excess of $400,000. Because this point often confuses people, that tax does not apply to all income, only to the dollars earned after the $400,000 threshold is surpassed.
A high top marginal tax rate is not a panacea for all our problems, by no means. But when it was in place it seems to have directly reduced greed and expanded the middle class. Indirectly, I believe it did a lot more good. Let’s try it again.