Key Takeaways

• Medicare Part D now includes a $2,000 annual out-of-pocket cap for prescription drugs, which significantly lowers your financial risk—especially if you’re managing chronic conditions.

• If you’re a Postal Service retiree or annuitant enrolled in PSHB with Medicare, this cap integrates with your benefits, but only if you remain enrolled in both Part D and your PSHB plan.

What Changed in Medicare Part D for 2025

Medicare Part D has undergone a historic update in 2025: it now includes a $2,000 out-of-pocket cap on prescription drug expenses. This change, implemented under the Inflation Reduction Act, replaces the old multi-phase structure that included a deductible, an initial coverage phase, and a catastrophic coverage phase that often left enrollees with substantial expenses even after hitting high thresholds.

The new structure provides predictability and relief:

• Once your out-of-pocket spending on covered prescription drugs hits $2,000, you pay nothing more for the rest of the calendar year.

• There is no longer a 5% coinsurance in the catastrophic phase. That phase is gone.

• You also have the option to spread your out-of-pocket costs throughout the year using the new Medicare Prescription Payment Plan.

Why This Matters to PSHB Enrollees

As a Postal Service annuitant or family member enrolled in the Postal Service Health Benefits (PSHB) program, you are automatically enrolled in a Medicare Part D Employer Group Waiver Plan (EGWP) when you become eligible for Medicare and continue PSHB coverage. This means that you’re not buying a stand-alone Part D plan—but you are still subject to the same $2,000 out-of-pocket cap as everyone else enrolled in Medicare drug coverage.

Here’s how this impacts you:

• Lower annual spending: The cap ensures your total annual prescription costs won’t exceed $2,000 for covered medications, regardless of how expensive your prescriptions are.

• Coordinated billing: The EGWP through PSHB works with your Medicare benefits to simplify billing and enhance coverage.

• No coverage gap (“donut hole”): The infamous coverage gap phase has been eliminated.

The Breakdown of the 2025 Part D Spending Structure

For PSHB enrollees using Medicare Part D drug coverage, here’s how the 2025 drug spending structure now works:

• Deductible Phase: You pay up to the Part D deductible, which is capped at $590 in 2025. Many PSHB-integrated EGWPs offer reduced or waived deductibles.

• Initial Coverage Phase: After meeting your deductible, your plan shares costs with you until your total out-of-pocket drug spending reaches $2,000.

• Cap Reached: After $2,000 in out-of-pocket spending, you pay nothing more for covered prescriptions through the rest of the year.

This system ensures a firm ceiling on how much you’ll personally spend in a calendar year.

What You Still Need to Pay Attention To

The $2,000 out-of-pocket limit is a major win, but it doesn’t mean all drug costs disappear. Here’s what still matters:

• Premiums still apply: While your out-of-pocket spending is capped, the monthly Part D premium—billed through your PSHB plan—still applies.

• Non-covered drugs: The cap only applies to drugs on your plan’s formulary. If a medication isn’t covered, you may have to pay the full cost.

• Cost-sharing before the cap: You’ll still pay copayments or coinsurance until you reach the $2,000 limit.

• Tier structures: Drugs in higher tiers may carry higher out-of-pocket costs before reaching the cap.

What to Do During Open Season (November–December)

The PSHB Open Season runs each year from November to December. During this period, you should review your plan and confirm that it still meets your needs, especially in light of the new Medicare Part D changes.

Use this time to:

• Confirm that your plan includes Medicare Part D EGWP coverage.

• Check the formulary to ensure your medications are still covered.

• Compare your plan’s cost-sharing rules up to the $2,000 cap.

• Review whether your plan offers a reduced or waived deductible.

• Consider how Medicare coordinates with your PSHB plan if you’re approaching or have reached age 65.

How the Medicare Prescription Payment Plan Works

Starting in 2025, Medicare introduces the Prescription Payment Plan, allowing you to spread your prescription costs over 12 months—even if you hit your $2,000 out-of-pocket cap earlier in the year.

This optional program is ideal if:

• You prefer even monthly budgeting over large early-year payments.

• You take multiple high-cost prescriptions.

• You worry about the financial burden of hitting your out-of-pocket max quickly.

You must opt into this program each year. While the $2,000 cap still applies, this payment plan offers flexibility.

What Happens If You Opt Out of Medicare Part D

Some PSHB annuitants may consider opting out of Medicare Part D. But this move has serious consequences:

• Loss of drug coverage: Your PSHB plan’s drug benefits are tied to your Medicare Part D enrollment. Opting out may terminate your drug coverage altogether.

• No re-enrollment: If you decline the EGWP coverage, you may not be allowed to rejoin it later.

• No out-of-pocket cap: Without Medicare Part D, you lose access to the $2,000 spending limit.

Unless you have other credible drug coverage, staying enrolled in Medicare Part D is critical to maintaining affordable, reliable prescription access.

Medicare Part D and PSHB Cost Coordination

When you have both Medicare and a PSHB plan, coordination of benefits helps reduce your total costs. Here’s how it typically works:

• Part D (via EGWP) pays first for covered medications.

• Your PSHB plan may cover additional amounts, including reducing or eliminating deductibles or copayments.

• Out-of-pocket spending still counts toward the $2,000 cap, regardless of which plan pays.

Make sure your plan coordinates properly—this can significantly affect how fast you reach the cap.

Who Must Enroll in Medicare for PSHB Plans

The 2025 PSHB rules require many annuitants and eligible family members to enroll in Medicare Part B—and, by extension, Medicare Part D—to maintain PSHB coverage.

This applies to:

• Annuitants who retired after January 1, 2025.

• Family members of Medicare-eligible annuitants.

Exemptions include those:

• Who retired on or before January 1, 2025.

• Aged 64 or older on January 1, 2025.

• Living outside the United States.

• Receiving care through the VA or Indian Health Service.

If you’re required to enroll but don’t, you could lose access to PSHB benefits entirely, including prescription drug coverage.

The Bigger Picture for Your Retirement Budget

Healthcare is a major expense in retirement, and prescription drugs often make up a large portion of it. The introduction of a firm $2,000 annual cap is a game-changer for your financial planning.

• Budget predictability: You can plan more confidently, knowing drug expenses will never spiral past the cap.

• Protection from drug price hikes: No matter how much prices rise mid-year, your out-of-pocket costs are locked.

• Better long-term coverage: With Medicare and PSHB working together, you get comprehensive support across hospital, medical, and pharmacy needs.

But this only works if you stay enrolled and review your coverage each year.

Take Control of Your PSHB and Medicare Drug Benefits in 2025

The 2025 updates to Medicare Part D give you a real opportunity to control your prescription drug spending. But that opportunity only benefits you if you understand how it integrates with your PSHB coverage.

Review your plan during Open Season, ensure your Medicare enrollment is current, and confirm that your prescriptions are covered. If you’re unsure what steps to take, reach out for help.

You can speak directly with a licensed agent listed on this website to make sure your plan aligns with your medical needs and your financial goals.