what would happen if we cut out the middle man that's making a shit ton of money on this?

Prisoners deserve everything they get to them.

State prisons are not part of "capitalism".

If you mean "capitalism+slavery", then yes, this is known to cause problems, hence all the civil rights efforts since Renaissance to make citizens roughly equal (even cut aristocracy a bit) and every resident a citizen.

Prisons and terms of incarceration are managed by the government and not by free market. This critique should be addressed to the legislature and not to capitalism.