High government subsidies “almost exclusively” drive consumer demand for prescription drug program plans, according to Ryan and co-researchers Francesco Decarolis of Bocconi University in Italy and Maria Polyakova of Stanford University School of Medicine.

“Consumers have very low willingness to pay for unsubsidized plans, driven by the availability of close substitutes,” they report.

In fact, they found that Part D “is efficient only if we account for the fact that the government would likely subsidize the same consumers outside of the (Part D prescription) program as well.”

The research paper provides new evidence that contributes to the emerging academic and policy discussion of the subsidy mechanism.

“This helps us inform policymakers when they’re thinking about setting up these kinds of subsidy mechanisms in other areas,” Ryan said.