Word out of Washington is that Republicans and Democrats in the Senate may rush to an agreement on a so-called compromise bill to add a multi-billion dollar prescription drug benefit to Medicare. The idea is to spend this money before Congress’s summer recess. The compromise would give the Democrats almost everything they want from a Republican minority running scared ahead of the November elections. While the Republicans have stopped short of offering to seize the mansions and yachts of drug company executives, according to Fox News they are willing to spend nearly half a trillion dollars over 10 years to hand out largely free drugs to seniors and create a new Medicare bureaucracy to oversee the giveaway. They’re prepared to set the nation on the road to out-of-control costs and eventual drug price controls before considering alternate, market-based plans to lower the costs of prescription drugs to seniors.

One such plan, centering on a Prescription Drug Security card, has been devised by Grace-Marie Turner of the Galen Institute and Joseph Antos of the American Enterprise Institute. Accountants estimate the cost at a bit more than $300 billion over 10 years, less than almost every other plan in Congress. Taxpayers would provide a $600 a year subsidy for routine drug purchases to Medicare recipients at or below 200% of the poverty line. The government would also pay for the purchase of private insurance coverage for catastrophic drug expenses. That would pay 80% of drug costs between $2,000 and $6,000 a year and would cover all costs above $6,000 a year. Any unspent balance in PDS accounts at the end of the year could be rolled over into the next year. Higher income Medicare recipients would receive scaled back benefits and would also get tax deductions for making their own deposits into PDS accounts.

Any plan that involves the government to such a great extent in the purchase of goods on the private market is dangerous. But less so than the compromise Congress is hatching. Senator Lott’s office has expressed interest in the PDS plan. Its spending would be targeted heavily at the most needy, as opposed to spread thinly over as many voters as possible. Allowing private insurers to administer most of the benefit is certain to be more efficient than leaving responsibility with the Medicare bureaucracy. The roll-over of money in the PDS accounts would encourage wise purchasing on the part of seniors, helping to keep drug prices down, instead of inflating them further. The House may well balk at any plan the Senate passes, so the Senate Republicans would do well to take it slow.