Key Takeaways

• In 2025, Medicare Part D introduces a $2,000 annual cap on out-of-pocket drug expenses, dramatically shifting how your prescription coverage works under the PSHB program.

• If you’re Medicare-eligible and enrolled in PSHB, your drug benefits now run through a Part D Employer Group Waiver Plan (EGWP), which offers different rules than you might expect.

Understanding the Relationship Between PSHB and Medicare Part D

With the official start of the Postal Service Health Benefits (PSHB) Program in 2025, you are now enrolled in a health plan designed exclusively for postal employees and retirees. If you are also eligible for Medicare, your PSHB coverage integrates differently compared to what you may have experienced under FEHB.

One of the most significant changes you’ll notice this year is how your prescription drug coverage works. Under PSHB, if you’re Medicare-eligible and enrolled in Medicare Part A and B, your drug coverage is now coordinated through a Medicare Part D Employer Group Waiver Plan (EGWP). This means:

• Your prescriptions are processed through a Medicare framework.

• You gain access to certain protections and caps introduced under the Inflation Reduction Act.

Understanding what these changes mean in practice is key to avoiding confusion and unexpected costs.

The New $2,000 Cap on Out-of-Pocket Drug Costs

As of January 1, 2025, your out-of-pocket spending for Part D-covered prescription drugs is capped at $2,000 per calendar year. This is not a deductible—it’s a total limit on what you personally pay.

Before 2025, drug coverage had four phases: deductible, initial coverage, coverage gap (donut hole), and catastrophic coverage. The donut hole and catastrophic phases created uncertainty and high costs for those with expensive medications.

Now, with the $2,000 cap:

• Once your total out-of-pocket spending reaches $2,000, your Part D plan pays 100% of the costs for the rest of the year.

• This limit applies to brand-name and generic drugs covered by your plan.

This change dramatically simplifies your cost planning and provides stronger financial protection if you take high-cost prescriptions.

What Happens to the Coverage Gap?

The infamous “donut hole” has been eliminated under the new rules. There’s no longer a separate phase where your costs unexpectedly spike after hitting a certain spending threshold.

With the 2025 structure, you only deal with three main phases:

1. Deductible Phase – You pay up to your plan’s deductible (maximum of $590 in 2025).

2. Initial Coverage Phase – Your plan and you share costs through copayments or coinsurance.

3. Catastrophic Phase – Now starts once your spending hits $2,000, and your plan covers everything after that.

This new structure reduces surprises and makes it easier for you to budget for your medications.

Monthly Payment Option for Drug Costs

In 2025, a new option called the Medicare Prescription Payment Plan becomes available. If you’re worried about paying a large sum early in the year for high-cost drugs, this plan can help.

• You can elect to spread your out-of-pocket drug costs over the year in monthly payments.

• This option is available even if you are in a PSHB plan with integrated Part D coverage.

• You must opt in to participate—it’s not automatic.

This flexibility can help you avoid financial strain, especially if your drug needs are front-loaded in the calendar year.

Coordination of Benefits Within PSHB Plans

Your PSHB plan coordinates with Medicare Part D EGWP, but this coordination can work differently than you might expect:

• No need to purchase standalone Part D: Your prescription drug coverage is automatically included under your PSHB plan if you’re enrolled in Medicare.

• Integrated formularies: The drug list (formulary) is aligned with Medicare’s Part D requirements.

• Network pharmacy rules apply: You must use in-network or preferred pharmacies to get the best cost-sharing rates.

Understanding this coordination is essential. Failing to use the correct pharmacy or not being aware of the new formulary structure could result in higher out-of-pocket costs.

Why Opting Out of Part D Isn’t Recommended

If you’re eligible for Medicare and choose not to enroll in Medicare Part B, you may lose eligibility for your PSHB plan entirely unless you meet an exemption. However, opting out of Part D isn’t technically required.

But here’s the catch:

• If you opt out of Medicare Part D’s EGWP component, you will lose your prescription drug benefits under PSHB.

• You will not be able to re-enroll in drug coverage later unless you qualify for a special enrollment period.

This is particularly risky if you later develop a serious condition requiring expensive medication. The $2,000 cap only applies if you’re in the Part D plan. Opting out removes that protection.

How Drug Costs Are Calculated Toward the Cap

Only certain costs count toward your $2,000 limit:

• Deductibles

• Coinsurance and copayments you pay

• Costs for drugs on the plan’s formulary

• Costs incurred at a network or preferred pharmacy

Non-formulary drugs or costs at out-of-network pharmacies do not count toward the cap. So, it’s vital to:

• Review your plan’s drug formulary annually

• Confirm your pharmacy is in-network

• Track your out-of-pocket spending if you take multiple prescriptions

Annual Review Is Now More Important Than Ever

With these changes, reviewing your Annual Notice of Change (ANOC) and plan materials each fall is no longer optional—it’s essential. Here’s why:

• Formularies can shift year to year, affecting what drugs are covered.

• Network pharmacies may change.

• Cost-sharing rules may be adjusted.

The 2025 updates introduced sweeping improvements, but you must remain vigilant about how your plan implements them.

Medicare Enrollment Deadlines Still Apply

Even though PSHB includes integrated Medicare drug coverage, you still must be enrolled in Medicare Part A and B to qualify. Medicare enrollment periods include:

• Initial Enrollment Period (IEP) – 7-month window around your 65th birthday.

• General Enrollment Period (GEP) – January 1 to March 31 each year, with coverage beginning July 1.

• Special Enrollment Periods (SEPs) – Triggered by events such as losing other coverage or moving.

If you missed enrolling in Part B and are not exempt under PSHB rules, you risk losing your health and drug coverage entirely.

Key Timelines to Remember in 2025

• January 1, 2025 – PSHB officially replaces FEHB for Postal Service annuitants and employees.

• October to December 2025 – Open Season for 2026 PSHB plan changes.

• Any time – You can opt into the Prescription Payment Plan if you are eligible and want to spread drug costs.

Mark your calendar and set reminders—missing key dates can leave you exposed to gaps in drug coverage or unexpected costs.

The Bigger Picture: Drug Coverage Under PSHB Is Changing for the Better

For many retirees, the integration of Medicare Part D into the PSHB system represents a significant upgrade in predictability and affordability.

• The $2,000 cap protects you from runaway costs.

• The monthly payment option adds financial flexibility.

• The streamlined benefit design reduces coverage gaps.

Still, these advantages only work in your favor if you stay informed and active in your plan choices.

Take Action Before Costs Take You by Surprise

These changes to your prescription drug coverage are designed to make your life easier—but only if you understand and use them correctly. Make sure you:

• Stay enrolled in Medicare Part A and B.

• Don’t opt out of your PSHB Part D drug coverage.

• Review your plan’s materials annually.

• Speak to a licensed agent listed on this website if you have any questions.