What Is Medicare Part D and Do You Need It?

Medicare Part D is the part of Medicare that covers outpatient prescription drugs. It is not included in Original Medicare (Parts A and B), which means that if you rely on Original Medicare for your health coverage, you need a separate plan to help pay for your medications.

For many people, prescription drugs are one of the largest and most variable healthcare expenses. Understanding how Part D works — and whether you need it — can make a meaningful difference in both your coverage and your costs.

How Part D Works

Part D plans are offered by private insurance companies approved by Medicare. Each plan has its own:

• Monthly premium — which varies by plan
• Annual deductible — the amount you pay before coverage kicks in
• Formulary — the list of drugs the plan covers, organized into cost tiers
• Pharmacy network — preferred pharmacies where you may pay less
• Coverage phases — the deductible phase, initial coverage, and catastrophic coverage

You can enroll in a standalone Part D plan if you are on Original Medicare, or you can get drug coverage built into a Medicare Advantage plan.

The Coverage Phases Explained

Part D has a unique cost structure that moves through phases during the year:

1. Deductible Phase

You pay the full cost of your drugs until you meet the annual deductible. No Medicare drug plan may charge a deductible of more than $615 in 2026, and some plans have a lower deductible or none at all.

2. Initial Coverage Phase

After meeting the deductible, you pay a copay or coinsurance for each drug, and the plan pays the rest. The amount you pay depends on which tier your drug falls into.

3. Catastrophic Coverage

Once your out-of-pocket spending on covered drugs reaches the annual cap — $2,100 in 2026 — you pay nothing more for covered Part D drugs for the rest of the calendar year.

• Part D covers outpatient prescription medications and is offered through private insurers approved by Medicare.
• Every plan has its own formulary — meaning the drugs covered and the costs can vary significantly between plans.
• Enrollment timing matters — if you delay Part D without other creditable drug coverage, you may face a permanent late-enrollment penalty.

Do You Need Part D?

The short answer: almost certainly yes — even if you take few medications now.

Here is why: if you go without creditable drug coverage (coverage that is at least as good as Part D) for 63 consecutive days or more, you may face a late-enrollment penalty that is added to your Part D premium for as long as you have the coverage. The penalty is calculated based on how many months you went without coverage.

Even if your current drug costs are low, having a Part D plan in place protects you from penalties and gives you coverage if your needs change. Many Part D plans have low premiums for people who use few medications.

How to Choose a Part D Plan

Choosing the right Part D plan is not about picking the cheapest premium. It is about matching the plan to your specific medications. Here is what to look at:

1. Check the formulary — Make sure your current medications are covered and note which tier they are on.
2. Compare total costs — Look at the premium, deductible, copays, and how costs add up through the coverage phases.
3. Check the pharmacy network — Using a preferred pharmacy can reduce your costs.
4. Review the plan rating — Medicare rates plans on a 5-star scale based on quality and customer satisfaction.
5. Check the coverage rules — some drugs require prior authorization or step therapy before the plan will pay, which can delay access even when the drug is technically covered.

A useful way to think about it: two plans with an identical premium can differ by hundreds of dollars a year if one of your prescriptions sits on a higher tier or your pharmacy is not in the preferred network. The premium is the smallest part of the picture.

This is one of the areas where having someone review your medications and compare plans for you can save real money. Summit Benefits Group does this for Kentucky clients every enrollment season.

Part D and Medicare Advantage

If you enroll in a Medicare Advantage plan that includes drug coverage (called an MA-PD plan), you do not need a separate Part D plan. Your drug benefits are built into the Advantage plan.

However, not all Advantage plans include Part D. If yours does not, you would need a standalone Part D plan — just as you would with Original Medicare.

Kentucky-Specific Considerations

A few things matter more in Kentucky than the national averages suggest:

• Plan availability varies by county. Rural Kentucky counties often have fewer plan options than the urban ones, so the comparison set is not the same everywhere in the state.
• Preferred pharmacy status matters most in small towns. If the independent pharmacy you have used for years is not in a plan's preferred network, your copays can be noticeably higher — and the nearest preferred option may not be convenient. Our service-area pages cover the communities we work in.
• Extra Help can change the math. The Low-Income Subsidy program can substantially lower Part D costs for Kentucky residents with limited income and resources.

If You Have Medicare Advantage With Drug Coverage

Most Medicare Advantage plans already include Part D drug coverage, and in that case you do not enroll in a standalone Part D plan alongside it — the drug benefit is part of the plan. The formulary, tiers, and pharmacy network still deserve the same scrutiny, because they vary between Advantage plans exactly as they do between standalone plans. If you are on an Advantage plan without drug coverage, a standalone Part D plan may be appropriate depending on the plan type.

Reviewing Your Plan Each Year

Part D is the part of Medicare that changes the most from year to year. Formularies, tier placement, deductibles, and pharmacy networks can all shift for the coming year, so a plan that fit well this year may not next year. Each fall during the Annual Enrollment Period, it is worth working through the same short list:

1. List every prescription you currently take, with dosage.
2. Check each drug against the plan's formulary for next year and note the tier.
3. Confirm your pharmacy is still a preferred pharmacy.
4. Add up the expected annual cost, not just the premium.
5. Re-check any prior authorization or step therapy requirements.

Related Reading

If your medication list is the deciding factor, how prescription costs change your Medicare decision works through that trade-off in detail. Our Medicare Part D page covers how drug plans are structured.

Part D decisions are best made with your actual medication list in hand. At Summit Benefits Group, we compare Part D plans for clients across Kentucky based on the drugs they actually take — not generic plan rankings.

We check formularies, pharmacy networks, and total estimated costs so you can pick the plan that genuinely fits your situation.