Key Takeaways

• The $2,000 out-of-pocket cap on Medicare Part D in 2025 offers substantial relief, but it does not eliminate all prescription drug costs.

• If you’re enrolled in the Postal Service Health Benefits (PSHB) program and Medicare, you may still have significant cost exposure depending on your drug needs, plan design, and use of in-network pharmacies.

Understanding the New $2,000 Part D Cap in 2025

Starting in 2025, Medicare Part D introduces a historic change: a $2,000 annual cap on out-of-pocket prescription drug costs. This provision, established under recent federal legislation, removes the previous complex coverage phases, including the infamous “donut hole,” and replaces them with a simpler structure.

Here’s what the new setup looks like:

• Deductible phase: You pay the plan’s deductible (up to $590).

• Initial coverage: You and your plan share the cost until your total out-of-pocket expenses reach $2,000.

• Post-cap coverage: After hitting the $2,000 cap, the plan covers 100% of covered prescription drug costs for the rest of the year.

This change is welcome, especially for those managing high-cost medications. But it’s not the end of out-of-pocket spending—and not everyone will feel equally protected.

Why Costs Can Still Be High—Even With a Cap

The $2,000 cap is helpful, but it’s important to remember what it does not include:

• Premiums: You still pay a monthly premium for your Part D drug plan or the equivalent PSHB-integrated plan.

• Non-covered drugs: If a medication isn’t on your plan’s formulary, you pay full price.

• Pharmacy restrictions: Costs can be higher if you fill prescriptions at out-of-network or non-preferred pharmacies.

• Drug tiering: Brand-name and specialty drugs are often placed on higher tiers with higher copayments or coinsurance rates until the cap is reached.

Depending on your specific prescription regimen, you could still face several months of high expenses before hitting the $2,000 threshold.

How the PSHB Program Coordinates With Medicare Part D

If you’re enrolled in a PSHB plan and are eligible for Medicare, your drug coverage is generally provided through a Medicare Part D Employer Group Waiver Plan (EGWP). These plans integrate your prescription benefits with your PSHB medical coverage.

Here’s how the coordination works:

• Automatic enrollment in EGWP: If you’re enrolled in Medicare and a PSHB plan, you’re usually automatically enrolled in a Medicare Part D EGWP that works with your health plan.

• $2,000 cap still applies: The cap also applies to EGWPs, giving you the same financial protection as standard Part D.

• Some PSHB plans offer extras: Certain PSHB plans may include additional financial protections, such as copay waivers or cost-sharing assistance, after you meet the cap.

But remember: these additional features vary, and not all plans offer the same level of post-cap support. It’s crucial to review your plan’s details annually.

Timing and Budgeting: When the Cap Might Hit You

The $2,000 cap is annual, resetting every January. But the timing of when you reach the cap depends entirely on how much you spend on prescriptions:

• If you take multiple high-cost drugs, you may reach the cap in the first few months of the year.

• If you only need occasional medications, you may never reach the cap—and may still pay full price for each prescription until you hit your deductible.

This can affect your monthly budgeting. For instance:

• Early in the year: You may see higher expenses until you reach the cap.

• Later in the year: After reaching the cap, you’ll no longer pay for covered drugs, potentially reducing your monthly out-of-pocket burden.

For retirees on a fixed income, managing these costs requires foresight and potentially using the new payment smoothing option.

Monthly Installments: A New Option in 2025

In 2025, a new Medicare feature called the Medicare Prescription Payment Plan allows you to spread out your prescription drug costs over the course of the year. Instead of paying large sums upfront, you can opt to pay a set amount each month.

Here’s what this means for you:

• No interest charged: This is not a loan; it’s a government-facilitated installment plan.

• Applies to Part D drugs only: Only medications covered by your Medicare drug plan are eligible.

• Enrollment is optional: You must actively opt into the program through your plan.

This monthly smoothing option can provide more predictable spending—but you must monitor your drug usage to avoid surprises.

What About Non-Medicare PSHB Enrollees?

If you’re not yet eligible for Medicare or don’t enroll in Part B, you won’t have access to the Medicare Part D EGWP. Instead, you’ll receive prescription coverage through the PSHB plan itself, with different cost-sharing terms and no $2,000 cap.

That means:

• Higher out-of-pocket risk: Some drugs may require coinsurance of 20%–30%, with no limit on total annual costs.

• Plan variation: Different PSHB plans have different formularies, copay structures, and out-of-pocket maximums.

• No access to the payment smoothing option: This feature is tied to Medicare and isn’t available through regular PSHB-only coverage.

If you’re approaching Medicare eligibility, it’s important to plan for the switch to Medicare-integrated coverage and understand when and how to enroll.

Coordination With Medicare Part B Is Key

To stay enrolled in your PSHB plan after becoming Medicare-eligible, you must generally enroll in Medicare Part B. This is not just an administrative requirement—it also affects your prescription drug coverage:

• Failure to enroll in Part B can result in loss of drug coverage: Many PSHB plans tie Part D EGWP enrollment to Part B participation.

• Missed deadlines may limit your future enrollment options: You may have to wait for the next General Enrollment Period and face penalties.

In other words, the $2,000 cap on drug costs is only available if you meet all Medicare eligibility and enrollment requirements under the PSHB rules.

Be Aware of Other Potential Prescription Costs

While the $2,000 cap applies to out-of-pocket costs for covered drugs, some hidden expenses may still surprise you:

• Non-formulary or excluded drugs aren’t covered and require full payment.

• Step therapy or prior authorization delays may temporarily interrupt access.

• Specialty pharmacy mandates may require you to fill prescriptions through certain providers, with potential higher costs if you go elsewhere.

You should always:

• Check your drug plan’s formulary.

• Confirm pharmacy network participation.

• Understand how exceptions and appeals work.

How to Make the Most of the $2,000 Cap

To get the full benefit from the new cost cap:

• Use preferred in-network pharmacies. These often offer lower copays.

• Review your plan’s formulary annually. Drug coverage can change from year to year.

• Track your spending. Keep an eye on how close you are to the $2,000 cap.

• Opt into the Medicare Prescription Payment Plan. This gives you predictable monthly costs.

• Coordinate with your healthcare providers. Ask if generic or lower-tier alternatives are available.

All of this requires active management—but the payoff is real protection against runaway drug costs.

Get the Right Help to Navigate Your Options

Understanding how your PSHB plan interacts with Medicare Part D, and how the $2,000 cap actually plays out in your personal situation, can be confusing. The right decisions depend on your health, prescription needs, and financial situation.

Don’t assume that all plans work the same or offer identical protection. And don’t wait until high bills start piling up.

Review Your Coverage Strategy Carefully

Even though the $2,000 cap is a major step forward, it’s not a silver bullet. Many PSHB enrollees may still find themselves paying substantial amounts for prescriptions, especially early in the year or when dealing with drugs outside the formulary. Staying aware of plan requirements, enrollment rules, and drug coverage details is essential.

To ensure you’re getting the most out of your benefits—and not leaving yourself exposed—reach out to a licensed agent listed on this website for professional advice tailored to your situation.