Key Takeaways

• In 2026, PSHB and Medicare Part D offer unique prescription coverage rules; understanding both is essential for federal retirees.
• Cost and coordination differences can impact out-of-pocket spending, especially during the coverage gap, so review your options carefully.

Did you know that in 2026, PSHB and Medicare enrollment coordination could impact how much you pay for your prescriptions, especially if you approach the Part D ‘donut hole’? Understanding the latest changes can help retirees avoid common pitfalls.

What Is the Medicare Part D Donut Hole?

Navigating Medicare Part D can seem overwhelming, especially with concepts like the “donut hole.” Let’s break down what the coverage gap is, how it works, and what’s changed in recent years.

Definition and Phases

The Medicare Part D “donut hole” refers to a temporary coverage gap in standard Medicare drug plans. When you have Medicare Part D, your prescription coverage typically moves through these phases each year:

1. Deductible: You pay full price for prescriptions until you reach the plan’s deductible.
2. Initial Coverage: After meeting the deductible, your plan pays part of your drug costs, and you pay co-pays or coinsurance.
3. Coverage Gap (Donut Hole): Once your combined drug costs reach a certain threshold (set annually by Medicare), you enter the donut hole. Here, your share of costs increases.
4. Catastrophic Coverage: If your out-of-pocket costs hit a maximum limit, you exit the donut hole. In this final phase, you pay only a small portion of drug costs for the rest of the year.

How Coverage Gap Occurs

You enter the donut hole when your total drug spending with the plan (including what you and your plan have paid) exceeds a predetermined amount. In the coverage gap, you’re responsible for a larger share—usually a percentage—of your prescription costs. The amount you pay out-of-pocket in the donut hole can influence how quickly you move into catastrophic coverage.

Recent Changes to the Donut Hole

Since 2020, the donut hole has gradually closed for many drugs. By 2026, you will generally pay no more than 25% of the cost for both brand-name and generic drugs while in the coverage gap. However, overall spending thresholds and how your costs are calculated can still change annually, so it’s important to review updated plan materials each year.

What Is PSHB Prescription Coverage?

The Postal Service Health Benefits (PSHB) Program began in 2025, replacing FEHB for eligible USPS employees and retirees. PSHB prescription coverage is designed to coordinate smoothly with Medicare, but has its own structure and rules.

Overview of the PSHB Program

PSHB is part of the broader federal health benefits landscape, but it is specifically tailored for USPS employees, annuitants, and associates. Medicare-eligible enrollees (age 65 and older) are required to enroll in Medicare Part B, and PSHB is structured to integrate with both Medicare Part A and Part D for prescription drugs.

How Prescription Benefits Work

For Medicare-eligible retirees, PSHB plans are automatically paired with a Medicare Part D prescription benefit when you enroll in both PSHB and Medicare. This means:

• Your prescription claims are usually coordinated, so you pay reduced copays at the pharmacy.
• Out-of-pocket costs and covered drugs may differ slightly from traditional Part D plans, but the donut hole and catastrophic coverage concepts still apply.
• PSHB plans often use their own drug formularies (lists of covered medications) and cost-sharing structures, mirroring federal requirements but with USPS-specific features.

Notable Changes Since 2025

Key updates since PSHB’s launch include:

• Enhanced coordination for dual-eligible members (enrolled in both PSHB and Medicare).
• Simplified enrollment for retirees turning 65 during the plan year.
• Integration of the latest Medicare cost-sharing rules and coverage gaps, ensuring PSHB plans remain compliant in 2026 and beyond.

How Do Costs Compare in 2026?

Cost is a top concern for most retirees. Let’s compare typical out-of-pocket expenses, the factors that drive these costs, and which coverage limits apply in 2026.

Typical Out-of-Pocket Expenses

With standard Medicare Part D, you may face costs at each phase: your plan’s deductible, then coinsurance or copayments, then increased costs during the donut hole, before catastrophic coverage lowers your expenses again. In 2026, the out-of-pocket maximum for catastrophic coverage is projected to be slightly higher than in previous years.

Under PSHB, your costs are similar but may be more predictable if your plan offers flat dollar copays instead of coinsurance. However, during the donut hole (coverage gap), you’ll still pay a standard percentage of drug costs, much like traditional Part D enrollees.

What Factors Influence Costs?

Several elements can affect what you pay out of pocket:

• Whether your medications are on the plan’s formulary
• The phase of coverage you’re in (initial, gap, or catastrophic)
• If you use preferred pharmacies
• Whether you qualify for federal or state assistance programs
• Annual updates to plan design by either PSHB or Medicare

Annual Limits and Catastrophic Coverage

The combined spending limits that trigger the donut hole and catastrophic coverage are set each year by Medicare. In 2026, you will likely see small adjustments to these amounts, impacting how soon you reach the coverage gap and when you qualify for catastrophic coverage, at which point your costs drop significantly.

How Does Coordination Work for Retirees?

Understanding which coverage pays first, and how your benefits work together, is central to maximizing your coverage and minimizing costs.

Dual Enrollment Scenarios

If you are a federal retiree enrolled in both PSHB and Medicare, your coverage will be coordinated. Typically, Medicare pays first on covered prescriptions, and PSHB acts as secondary. This can help reduce out-of-pocket costs.

Primary vs. Secondary Payer Rules

Medicare, as the primary payer, processes prescription claims before PSHB. PSHB becomes the secondary payer and may cover additional costs (depending on plan design), further lowering your share. If you do not enroll in Medicare Part D, your PSHB plan will manage all prescription claims.

OPM Guidance for 2026

According to guidance from the U.S. Office of Personnel Management (OPM), PSHB enrollees should:

• Review plan materials each fall for changes in coordination rules
• Ensure timely enrollment in both PSHB and Medicare to avoid gaps or penalties
• Use designated customer service contacts to resolve claims coordination issues

What Questions Should You Ask in 2026?

Making informed decisions is easier when you know what to ask your benefits representative or plan.

Assessing Prescription Needs

Start by reviewing your current medications:

• Are they covered under both PSHB and Medicare Part D?
• What are your projected medication costs based on updated formularies?
• Do any new therapies require special authorization?

Timing Your Enrollment Decisions

Keep these timing considerations in mind:

• When do your current health and drug plan years renew?
• Will delaying Medicare or PSHB enrollment affect your coverage or costs?
• Are there deadlines for switching plans if your needs change?

Understanding Open Season Changes

Open Season is your annual opportunity to review and change your health coverage. For 2026:

• Examine all plan changes announced by OPM and PSHB sponsors
• Consider the impact on your prescription costs
• Make sure your desired pharmacy is included in the plan’s network