People in the United States, in general, don’t know much about economics. Upon graduation from high school, they often don’t know anything about credit ratings (and how they affect people), how to create and follow a budget, the difference between simple and compound interest, and so forth. Some people occasionally launch memes or threads talking about how schools should have a mandatory course called “Life” that teaches basic economics, basic cooking, basic laundry, basic childcare, and so forth. I think that is a great idea — but that’s not the way it currently is.
In spite of the active use, in conversations, of the words “socialism”, or “communism”, or other political/economic system — people in the United States, in general, know even less about them than they do capitalism. They just make good scare words to toss about.
Some Basic Aspects of Capitalism
People in the United States come to know something about capitalism because they are surrounded by it every day. They learn some the first time they get a job — or pay taxes. They learn some the first time they try to rent an apartment. They learn some the first time they run out of money before the end of the month. All of these situations are the “hard way to learn” — and why the potential “Life” course makes so much sense. But, at the end of it all, people in the United States do learn about the aspects of capitalism which affect them in their day-to-day lives.
That does NOT mean that people in the United States all know all of the aspects of capitalism. People running businesses have knowledge of additional areas than those known by ordinary consumers. CPAs and tax lawyers know more about accounting-related aspects of capitalism. But there are aspects of capitalism (which is currently tightly coupled with consumerism) that most people just don’t think about, or understand, because they only affect them “behind the scenes”. Some of those “behind the scenes” activities affect people in external ways such as “inflation” — and the lack of understanding is taken advantage of by politicians.
But this is not an economics course — and I am not an economist. I am just someone who is curious about, and questions, just about everything I encounter in life (which can be extremely annoying to those close to me <smile>).
One of the basics of capitalism is the concept of “profit”. A profit is created when something is sold for more than it costs to create/excavate/manipulate it. It costs me $5 to make a widget. I sell the widget for $7 and I make $2 profit. Capitalism strives to make greater and greater profits — either by selling more or by making the difference between creation cost and selling price larger. Those profits go to various entities — employees, management, benefits, pension plans, stockholders, executives (separated from management because their situation is manipulated differently by governing boards and competition at the executive level), and so forth.
A “non-profit” company differs from a “for-profit” company in that there is, officially, no difference between incoming money and costs for all that is needed to provide the product/service. It is not actually as different from “for-profit” as one might think — in order to be non-profit, all incoming monies must be spent and that extra money may go to larger employee/management/executive salaries, perks, and bonuses or it can be spent for more services (more wells for potable water to more people?). The money which would be called profits, and potentially distributed to stockholders, is absorbed into the daily workings/expenses of the company. A non-profit company is inherently a private company with no stockholders. That is the primary difference to people who interact with such companies.
In the case of a charitable non-profit, it is important to know where that money goes. Sites like Charity Navigator can help donors know how much is really going to help people versus how much is being kept within the company.
A for-profit company will increase profits by:
Increasing the number of sales
Increasing the difference between cost to provide and price to acquire. They do this by:
Increasing the price to be charged for sales AND / OR
Decreasing the cost of the item/service to be provided
Capitalism as Applied to the Current US Healthcare System
Now that we have a basic idea of how capitalism works, lets examine the current workings of the United States’ unique form of healthcare. As one of many for-profit companies, it will want to increase profits in the manner described above. In the US, there are multiple companies that compete to provide healthcare which reduces the number of potential customers/patients for each company. Unlike customers for other products, each customer comes with a certain amount of statistically-likely amount of services to be needed. Each company will want to attract the customers for which they will make the largest profit — charge the most and give back, in service, the least. In the near past, that could lead to the reality that NO company would want to provide service to a likely low-profit individual. The “Affordable Care Act” (ACA) addressed this in part, mandating that some form of medical care would be provided for each person who applied — if not within existing private for-profit companies then within existing government administered healthcare.
The other aspects of for-profit healthcare still largely exist independent of the existence of the ACA. Each company will try to provide the least amount, or least expensive, form(s) of service. Each company will try to charge the most for the least service. The formulas become so complicated, and difficult for the general consumer to understand, that it is not surprising that many “throw up their hands” and just pick the healthcare option that, on the surface, seems to be most appropriate, and valuable, based on their individual circumstances.
The advantage of this situation, within the US capitalistic society, is that stockholders can invest and expect large returns — basically a transfer of money from the pockets of the served to those who have invested in the companies.
It has another advantage to the executives of stockholder-owned companies in the way that executives obtain their salary/perk/bonus/severance packages. For public stock-providing companies (not just healthcare), in spite of stockholders having some control (usually unused), the governing boards decide these financial aspects and they have incentives to keep it as high as possible. The primary one is “bragging rights”. Very expensive executives must be worth it, or they wouldn’t be paid such, right? That is the assumption, and governing boards use that assumption to justify increasing amounts.
It is extremely strange if one steps back from the situation. They are “worth more” because they are paid more — and they are paid more because it gives external companies/stockholders/people the feeling that they must be worth more. Whether they truly are worth these extremely large financial packages is a matter of opinion. Their financial packages certainly raise the prices of services/products produced by the company.
Capitalism as Applied to Universal Healthcare
We have seen that aspects of private multiple for-profit healthcare are strongly against the benefit of the customers (patients). Why is a centrally administered universal healthcare better for the customers (patients)? Note that this could still be a non-governmental non-profit company. However, the administration of the medical system by existing sections of the government is also possible — and might be easier than setting up a new non-profit. It is essentially still following the capitalist formula.
A Universal HealthCare system doesn’t have to keep track/authorize use of healthcare. Some ID is still needed to make sure all providers get the money they deserve for providing their share of the services needed by the patient but many aspects of authorization and benefit calculation/matching becomes moot — no need of that extra overhead (which amounts to a very large amount of time, money, and frustration within the US system). Imagine a doctor saying you need something and not having a need to check through your insurance policy to see if it is covered!
A Universal Healthcare does not have to be concerned about short-term, or long-term, profits. All decisions can be made based upon the needs of the patients. If the cost of services rise (averaged from the needs of a very large number of people) then the price to the consumers goes up — whether it is provided directly by the customers (patients) or whether it is provided through their tax money funneled through the government.
A Universal Healthcare still has employees/service-providers/management & executives. But there is no platform for justifying huge packages for executives.
All-in-all, staying within the capitalist political/economic system, a Universal Healthcare lowers the cost to the customer (patient). It lowers overhead, it provides a direct connection between services provided and cost, and it eliminates very large executive packages. This is true no matter what entity provides the services — a non-profit company outside of the government or a non-profit company run within the government structure.
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