Key Takeaways

• The 2025 Medicare Part D program includes a $2,000 annual out-of-pocket cap, but you can still face unexpected costs based on plan rules, tier levels, and formularies.

• Postal Service Health Benefits (PSHB) enrollees who are Medicare-eligible must understand how their Part D drug coverage integrates with PSHB plans to avoid penalties and costly surprises.

What Part D Covers on Paper vs. What You Actually Pay

At first glance, Medicare Part D prescription coverage looks straightforward. You pay a monthly premium, a deductible, and then a copayment or coinsurance depending on the drug tier. However, what often catches PSHB enrollees off guard is how quickly costs can escalate once they begin filling medications—especially high-cost or non-preferred drugs.

The structure of Part D in 2025 includes:

• A deductible phase (up to $590 in 2025).

• An initial coverage phase where you pay a portion of the cost (typically 25%).

• A catastrophic coverage phase triggered when your total out-of-pocket spending reaches $2,000, after which your plan covers 100% of covered drug costs.

What’s often overlooked is how quickly you can move through these phases, especially if you take multiple medications or use specialty drugs. This design leads to the false assumption that spending is spread evenly across the year.

The Fine Print of Drug Tiers and Formularies

Every Part D plan uses a formulary—a list of covered drugs sorted into cost-sharing tiers. Understanding these tiers is critical:

• Tier 1: Preferred generics, lowest cost

• Tier 2: Non-preferred generics or preferred brand drugs

• Tier 3: Non-preferred brand-name drugs

• Tier 4: Specialty drugs, highest cost

Plans are not required to cover all medications in every category. If your drug is not listed, you may need to:

• File for an exception,

• Change medications based on your prescriber’s recommendations, or

• Pay out of pocket.

PSHB enrollees sometimes discover that even common medications are not covered as expected. Some drugs may be moved to a higher tier from one year to the next, resulting in increased cost-sharing.

Step Therapy, Prior Authorization, and Quantity Limits

Another overlooked aspect of Part D coverage is utilization management, a process used to control costs and ensure appropriate use of medications. This includes:

• Step therapy: You must try less expensive alternatives before the plan approves a higher-tier drug.

• Prior authorization: Your provider must get approval from the plan before it will cover the drug.

• Quantity limits: Restrictions on the amount of medication you can receive within a certain timeframe.

These hurdles can delay access to necessary medication. Many PSHB participants only discover these requirements when a pharmacy denies a prescription. Appeals can take time, leaving beneficiaries caught in administrative limbo.

The Hidden Role of the Annual Notice of Change (ANOC)

Each fall, you receive an Annual Notice of Change (ANOC) from your PSHB plan. It outlines updates to costs, covered drugs, and utilization rules for the following year. Ignoring or misreading the ANOC can lead to:

• Unexpected drug exclusions

• Higher out-of-pocket expenses

• Missed deadlines to switch plans or request exceptions

For 2025, plan formularies may have shifted. Drugs previously covered under a lower tier may have moved to a higher tier, affecting your cost-sharing. Always review your ANOC carefully to avoid surprises at the pharmacy counter in January.

How the $2,000 Out-of-Pocket Cap Actually Works

The new $2,000 annual out-of-pocket limit under Part D, effective in 2025, is a landmark improvement. But there’s a common misconception: that your financial exposure disappears completely once you’re in the plan.

The $2,000 cap applies only to true out-of-pocket costs, including:

• Deductibles

• Coinsurance/copayments

• Payments for drugs not reimbursed by other insurers

What it does not include:

• Monthly Part D premiums

• Non-covered drugs

• Out-of-network pharmacy costs

Once you reach $2,000 in qualified spending, your plan pays 100% of covered drug costs. However, reaching that threshold could take months depending on your prescriptions. If you only take generics or low-cost medications, you might never hit the cap. This means you’ll continue to share costs without ever seeing the benefits of the cap.

Coordination Between PSHB and Medicare Part D

If you’re a Medicare-eligible Postal retiree or family member, your PSHB plan typically includes a Part D Employer Group Waiver Plan (EGWP). This integrates prescription coverage under Medicare into your PSHB plan.

The benefits of this coordination include:

• Automatic enrollment in the EGWP version of Part D

• Lower drug prices negotiated under Medicare’s structure

• A streamlined benefit design with a single pharmacy card

However, you must be enrolled in Medicare Part B to qualify for this integration. Skipping Part B enrollment could result in loss of prescription coverage or gaps in drug benefits.

Also, opting out of the EGWP means you may lose your PSHB drug coverage entirely. You generally cannot enroll in a standalone Part D plan and remain in PSHB.

Unexpected Costs from Non-Covered Medications

Even within a well-structured PSHB Part D plan, you may encounter prescriptions that aren’t covered. These situations can arise due to:

• Off-formulary status

• Non-FDA-approved uses (off-label prescribing)

• Lifestyle or cosmetic drug exclusions

When this happens, the full cost of the drug is your responsibility, and those payments do not count toward the $2,000 cap. This is why it’s essential to:

• Review your drug list each year

• Ask your provider whether your medication is on the PSHB formulary

• Consider alternatives when possible

Timing Matters: Enrollment Windows and Penalties

To benefit from the PSHB drug coverage integration with Medicare Part D, you must enroll during appropriate timelines:

• Initial Enrollment Period: 3 months before, the month of, and 3 months after your 65th birthday.

• Special Enrollment Period (for PSHB): Available if you delayed Medicare Part B because you had active employee coverage.

• Annual Enrollment (Open Season): Runs from November to December each year.

Missing these windows can lead to permanent late enrollment penalties on your Part D premium. Even though you’re enrolling through PSHB, these Medicare rules still apply.

Pharmacy Network and Coverage Rules Still Apply

Just like with other Part D plans, your PSHB EGWP coverage still uses a preferred network of pharmacies. Using an out-of-network pharmacy—even by accident—can lead to higher costs or outright denial of claims.

Also, mail-order pharmacies often have different pricing. You may get better savings by switching to a 90-day mail order, but some drugs may require in-person pickup due to regulatory restrictions or safety concerns.

Keep in mind:

• Always confirm the pharmacy is in-network

• Double-check whether prior authorization is required

• Ask about lower-cost generics or therapeutic alternatives

Reviewing Your Drug Coverage Every Year Is Not Optional

One of the most common mistakes PSHB enrollees make is assuming their drug coverage will stay the same year after year. But formularies, pricing structures, and pharmacy networks change annually.

Each fall, during the Open Season, take time to:

• Compare your current plan’s drug coverage for the coming year

• Look at any tier changes that affect your medications

• Confirm if new utilization rules are being added

The more proactive you are, the fewer surprises you’ll face in January.

Why Personalized Help Matters

Understanding PSHB Part D integration isn’t easy, especially when juggling Medicare timelines, cost caps, tier changes, and pharmacy network restrictions. What makes sense for one retiree may be financially risky for another depending on their prescriptions, income level, and health status.

Working with a licensed agent listed on this website ensures you:

• Stay in compliance with Medicare requirements

• Maximize your PSHB drug benefits

• Avoid costly oversights that can disrupt your coverage

The Cost of Ignoring the Fine Print in 2025

In 2025, Medicare Part D presents real opportunities to reduce your out-of-pocket spending—but only if you know how to use the system. Between drug tiers, authorization rules, and enrollment deadlines, there are multiple ways to lose benefits or spend more than you expected.

PSHB enrollees should carefully review their drug coverage during Open Season, confirm eligibility for Medicare Part B, and evaluate whether their medications are on formulary and at what tier.

If you’re uncertain, speak with a licensed agent listed on this website to get clear, personalized guidance before making plan changes that could affect your entire year.