Key Takeaways

• In 2025, Medicare Part D introduces a $2,000 annual cap on out-of-pocket drug costs, but this benefit may be less straightforward than it seems for Postal Service Health Benefits (PSHB) enrollees.

• Understanding how the new payment phases and cost-sharing rules interact with PSHB plans is critical before you assume your costs will be lower.

The New Promise of Part D in 2025

At first glance, 2025 looks like a banner year for Medicare Part D. A new federal rule now limits your annual out-of-pocket spending on prescription drugs to $2,000. This cap is meant to help retirees, including PSHB enrollees, who face rising drug prices. On paper, it sounds like a clear win.

But the truth is more complex. Not all costs are included in the cap. Not all plans treat drugs the same way. And the way PSHB integrates Medicare Part D benefits may affect what you actually pay. If you’re enrolled in a PSHB plan and are Medicare-eligible, especially if you’re retired, you need to read the fine print.

What the $2,000 Cap Actually Covers

The new $2,000 limit applies to true out-of-pocket costs on covered prescription drugs. These include:

• Your deductible

• Copayments and coinsurance

• Any payments made during the initial coverage and catastrophic phases

It doesn’t cover:

• Premiums for your Part D plan or PSHB coverage

• Non-covered drugs

• Drugs obtained out-of-network

So while the cap is a helpful guardrail, it doesn’t erase all drug-related expenses.

Three Payment Phases You Still Go Through

The $2,000 cap doesn’t eliminate the structure of Medicare Part D—it simply puts a ceiling on what you’ll pay. You still move through three phases:

1. Deductible Phase

In 2025, the standard deductible is up to $590. You must pay this full amount before your plan begins sharing costs.

2. Initial Coverage Phase

After you meet your deductible, your plan begins to share costs. You’ll typically pay a copayment or coinsurance until your combined spending reaches a certain threshold.

3. Catastrophic Coverage Phase

Once your out-of-pocket spending hits $2,000, you enter catastrophic coverage—except in 2025, catastrophic costs are now fully covered. You won’t pay anything further for covered drugs for the rest of the year.

Why PSHB Enrollees Still Need to Pay Close Attention

As a PSHB enrollee, your Part D coverage is built into your plan through a Medicare Employer Group Waiver Plan (EGWP). This means:

• You’re automatically enrolled in a Part D EGWP if you’re Medicare-eligible

• You typically get extra benefits like enhanced formularies or reduced copays

• But you must stay enrolled in Medicare Part B to remain eligible

This integration is designed to streamline your drug coverage, but it can still be confusing. Depending on your plan, you might:

• Have copays that count toward the $2,000 limit—or not

• Get drugs that are covered by your plan but not by standard Medicare Part D, and thus not count toward your out-of-pocket cap

Carefully reviewing your plan’s formulary and cost-sharing structure is more important than ever in 2025.

Monthly Payment Option Isn’t Automatic

To make drug costs more manageable, Medicare now offers a Prescription Payment Plan. This lets you pay your out-of-pocket costs in monthly installments rather than at the pharmacy counter all at once. But this program:

• Requires you to opt in

• Applies only to the portion of your drug spending that counts toward the $2,000 limit

• Doesn’t reduce your total spending—just spreads it out

If you expect to reach the cap early in the year due to high-cost medications, this monthly option could be a lifeline. But it’s not automatic—you must actively enroll through Medicare.

Drugs That Don’t Count Toward the Cap

Even with the new rules, not every drug you take will count toward the $2,000 limit. These include:

• Over-the-counter medications

• Non-Part D drugs (such as some weight-loss or cosmetic treatments)

• Drugs not on your plan’s formulary

• Drugs purchased from out-of-network pharmacies

In the context of PSHB, some plans may also cover additional drugs that aren’t included in standard Part D—these won’t count toward your out-of-pocket cap either.

PSHB and Medicare Coordination Makes It Tricky

Coordination between PSHB and Medicare matters more than ever. Here’s why:

• If you opt out of Medicare Part D, you could lose drug coverage under PSHB entirely

• If you skip Medicare Part B, you may become ineligible for PSHB altogether if you’re subject to the new requirement

• If your plan has supplemental drug coverage, some of those drugs may not count toward the Medicare cap

Bottom line: Your PSHB plan and Medicare must work together for the out-of-pocket limit to work as intended. Otherwise, the cap might give you a false sense of security.

Watch Out for Mid-Year Changes

In 2025, PSHB and Medicare plans are required to send a Mid-Year Enrollee Notification of Unused Supplemental Benefits. This will:

• List unused benefits such as transportation or over-the-counter allowances

• Help you make full use of your plan

• NOT affect your Medicare Part D cap—but could impact your overall out-of-pocket savings

Don’t ignore this notice when it arrives mid-year. It’s an opportunity to capture more value from your plan and reduce overall health costs, even if those savings don’t show up under the Part D out-of-pocket math.

The Clock Resets Every Year

Every January 1, the Medicare Part D cost-sharing meter resets. That means:

• You begin the year in the deductible phase

• All prior payments from last year no longer count

• You’ll start paying again until you reach the $2,000 threshold

This annual reset is especially important if you have high-cost prescriptions early in the year. Planning your budget accordingly can prevent surprise expenses during the first few months.

Why Assumptions Could Be Costly

Too many retirees assume that enrolling in a PSHB plan that includes Part D protection means they’re fully covered. In reality, costs vary depending on:

• How your plan integrates Medicare Part D benefits

• Whether all your medications are covered by both PSHB and Medicare

• When you hit the deductible or cost-sharing thresholds

Don’t rely on assumptions. Look at your plan brochure. Check your Explanation of Benefits (EOB) monthly. Know which drugs count—and which don’t.

How to Prepare for 2025 Drug Costs

Here’s what you can do right now to avoid surprises later:

• Review your plan’s formulary: Make sure your current medications are covered under both PSHB and Medicare Part D.

• Track your spending: Monitor where you stand in the deductible and cost-sharing phases.

• Consider the monthly payment option: Enroll early if you anticipate reaching the cap.

• Stay enrolled in Medicare Part B: This is essential for keeping your PSHB benefits and your drug coverage.

• Use in-network pharmacies: Out-of-network purchases may not count toward the $2,000 limit.

Understanding the Limits Helps You Take Control

The new $2,000 cap in Medicare Part D is a helpful safety net—but it’s not a blanket solution. For PSHB enrollees, understanding which drugs count, how your plan integrates benefits, and when to act can protect you from unnecessary out-of-pocket costs.

Don’t make the mistake of assuming you’re covered just because you’re enrolled. Read your plan materials. Stay informed. And when in doubt, get help.

For personalized guidance tailored to your specific situation, speak with a licensed agent listed on this website. They can walk you through how the Medicare Part D changes affect your current PSHB coverage—and help you avoid expensive missteps.