Key Takeaways

• The new $2,000 cap on out-of-pocket drug costs under Medicare Part D in 2025 is a major improvement, but it does not automatically reduce your total medication expenses if you’re not enrolled in the right type of plan.

• As a Postal Service Health Benefits (PSHB) enrollee, your prescription coverage is typically integrated through Medicare Part D Employer Group Waiver Plans (EGWPs), which means your experience with the new cap may differ from the standard Medicare beneficiary.

Understanding the $2,000 Cap: What It Actually Means

Beginning January 1, 2025, Medicare Part D includes a long-awaited change: an annual $2,000 limit on out-of-pocket costs for prescription medications. This is a direct result of the continued implementation of the Inflation Reduction Act.

Before 2025, beneficiaries moved through several phases in Part D—the deductible, initial coverage, coverage gap (“donut hole”), and catastrophic phase—each with its own cost-sharing rules. Once you hit the catastrophic phase, you were still responsible for 5% of drug costs. That 5% could add up significantly, especially for high-cost medications.

In 2025, that final 5% goes away. Once you’ve spent $2,000 out-of-pocket on covered prescription drugs, your plan pays 100% of covered costs for the rest of the year. This is a substantial financial relief.

However, there are limitations and key conditions:

• The cap applies only to covered drugs under Medicare Part D.

• It does not include monthly premiums for Part D coverage.

• It only counts true out-of-pocket (TrOOP) costs, meaning manufacturer discounts and what you pay, not what your plan pays.

How PSHB Plans Use Employer Group Waiver Plans (EGWPs)

For Postal Service retirees enrolled in both PSHB and Medicare, prescription drug coverage is provided through a Medicare Part D EGWP. This is an enhanced version of Part D, typically bundled with the medical portion of your PSHB plan.

EGWPs must follow CMS rules but can offer enhanced benefits. This means:

• You are still protected by the $2,000 out-of-pocket cap.

• Your EGWP plan may cover additional drugs or have lower copayments.

• You do not need to enroll in a standalone Part D plan.

That said, because EGWPs are employer-sponsored, they can have unique cost-sharing structures or utilization management rules that differ from standard plans. So, while the $2,000 cap still applies, how quickly you reach it and what counts toward it might look different.

What Does This Change Mean for You?

If you’re a Medicare-eligible Postal Service annuitant with PSHB coverage:

• You benefit from the $2,000 cap through your EGWP-integrated plan.

• Your prescription expenses should now be more predictable.

• You won’t face surprise bills due to the elimination of the catastrophic 5% coinsurance.

However, if you’re not enrolled in Medicare Part B—and therefore not eligible for Part D EGWP—you may miss out entirely on this benefit.

Also, not all drugs are included under the cap. Drugs that aren’t covered by your plan, or those obtained outside the network, don’t count toward the $2,000.

What About High-Deductible PSHB Plans?

Some PSHB options operate under a high-deductible health plan (HDHP) structure with health savings accounts (HSAs). While these offer tax benefits, they can:

• Delay how quickly you reach the $2,000 Part D cap.

• Require higher upfront costs for prescriptions before Part D kicks in.

Make sure you understand how your PSHB plan handles prescription benefits if it includes an HDHP component. You may need to spend more initially before hitting the $2,000 threshold.

Monthly Payment Option: Medicare Prescription Payment Plan

New in 2025, you can now choose to spread your out-of-pocket drug costs across 12 months, even if you hit the $2,000 cap early. This is called the Medicare Prescription Payment Plan.

For PSHB enrollees:

• This feature is optional but useful if you prefer budgeting evenly each month.

• Your plan should notify you of this option and how to opt in.

• If you opt in, you pay a fixed monthly amount based on your expected total out-of-pocket drug costs.

This smooths out your drug spending, especially if you have expensive medications early in the year.

Don’t Confuse the Cap with Other Out-of-Pocket Limits

It’s important to understand that this $2,000 cap applies only to prescription drugs under Part D. Your total healthcare out-of-pocket maximum under PSHB is much higher. For 2025, those limits typically look like this:

• $7,500 for Self Only

• $15,000 for Self Plus One and Self and Family

These include deductibles, copayments, and coinsurance for all medical services, not just drugs.

So, if you hear that the new cap “limits your total expenses,” remember:

• The $2,000 cap is not a cap on total healthcare costs.

• You can still owe significant amounts for hospital visits, specialist care, and other medical needs.

When Does the Cap Reset?

The $2,000 limit resets each calendar year. So starting January 1, 2026, your out-of-pocket drug costs start counting again toward a new $2,000 maximum.

Keep track of your drug spending as the year progresses. Your PSHB plan will provide an Explanation of Benefits (EOB) that shows how much you’ve paid and how close you are to the cap.

What If You Don’t Reach $2,000 in Drug Costs?

Many enrollees won’t reach the $2,000 out-of-pocket threshold. That’s not necessarily a bad thing. It just means your medication needs are low or your plan absorbs a large portion of the cost.

If that’s the case:

• You continue to pay standard copayments or coinsurance throughout the year.

• You still benefit from price protections, such as insulin cost limits and no cost-sharing on recommended vaccines.

Will All PSHB Plans Automatically Apply the Cap?

Yes. Because the cap is a federal requirement, all Medicare Part D plans—including EGWPs under PSHB—must comply with it.

However, the experience and implementation can vary. Some plans might:

• Offer lower copays than required.

• Provide additional coverage beyond the minimum Part D standard.

• Require prior authorizations or step therapy before approving costly medications.

It’s crucial to review your plan’s benefits booklet or speak with a licensed agent listed on this website to make sure you’re using your coverage efficiently.

How to Prepare for the Cap in 2025

To get the most out of the new $2,000 limit:

• Enroll in Medicare Part B if you haven’t already—this ensures you get access to PSHB’s EGWP prescription benefits.

• Review your current PSHB plan’s drug formulary to confirm your medications are covered.

• Track your out-of-pocket drug spending monthly using plan statements.

• Consider enrolling in the Prescription Payment Plan if you prefer even monthly costs.

Why You Still Need to Compare PSHB Plans Carefully

Even with the $2,000 cap, choosing the wrong PSHB plan could still cost you more than necessary.

Each PSHB plan varies in:

• Premium contributions

• Deductible levels

• Copayment and coinsurance structure

• Formulary coverage

So while all plans offer the same $2,000 Part D protection, your total cost will depend heavily on:

• How your medications are priced within the plan

• Whether your drugs are in-network and covered

• What kind of prior approval or rules are applied

Not All Plans Make This Easy to Understand

The transition to this new system is a major change for Medicare, and communication isn’t always crystal clear. You might not immediately realize how the cap is working or how your spending is being tracked.

Make sure to:

• Read plan documents carefully

• Call your plan for clarification if something doesn’t make sense

• Use your plan’s customer portal to check your current out-of-pocket totals

A licensed agent can walk you through the details and help you confirm whether your drugs qualify under the cap.

Why This Change Matters More Than Ever

Healthcare inflation continues to pressure retirees, and prescription drugs often make up a large portion of your out-of-pocket medical spending. This $2,000 cap is a welcome change, but it’s only part of the bigger picture.

To truly control costs, you must:

• Coordinate Medicare Parts A, B, and D with your PSHB coverage

• Select a PSHB plan with the right cost-sharing mix for your needs

• Monitor your plan’s formulary each year during the Open Season

Missing one piece of this puzzle could mean paying more than necessary, even with a federal cap in place.

How to Take Action Now

You don’t need to wait until the next Open Season to start evaluating your options. If you’re already enrolled, review your plan materials and assess whether your prescriptions are covered appropriately. If you’re approaching Medicare eligibility, prepare to enroll in Part B and choose a PSHB plan that includes integrated Part D coverage.

To make the right decision, consider speaking directly with a licensed agent listed on this website. They can explain how the $2,000 cap works in your specific PSHB plan and help you prepare for 2025 and beyond.

Understand the Cap, But Look Beyond It

The $2,000 out-of-pocket drug cap in 2025 is a significant win, but it doesn’t mean your costs are automatically low. The real impact depends on how your PSHB plan is structured, which prescriptions you take, and whether you coordinate it properly with Medicare.

The safest route is to stay informed, review your plan documents annually, and get personalized advice when needed. Reach out to a licensed agent listed on this website if you have any questions or concerns about your coverage.