Key Takeaways

• Medicare Part D now includes a $2,000 annual cap on out-of-pocket prescription drug costs in 2025, but that does not mean all drugs are automatically covered or affordable.

• If you’re enrolled in a Postal Service Health Benefits (PSHB) plan and are also eligible for Medicare, you must still review your drug formulary each year to ensure your medications are included and covered appropriately.

A New Era for Drug Spending—but Not a Free Pass

The 2025 update to Medicare Part D is one of the most significant shifts in prescription drug coverage in recent history. The new $2,000 annual cap on out-of-pocket costs is a major win for Medicare beneficiaries, including Postal Service annuitants and their eligible family members under the PSHB Program. However, this change only applies to covered drugs within your Part D plan’s formulary.

What does that mean for you? If your medication isn’t listed or is classified in a higher tier with prior authorization or quantity limits, you could still face challenges even with the cap in place. Understanding what your Part D plan does and doesn’t cover is critical, especially now.

Why the $2,000 Cap Matters—And Its Limits

The new cap means that once your out-of-pocket spending on covered prescription drugs hits $2,000 in a calendar year, your plan covers 100% of your additional drug costs for the rest of the year. This cap includes:

• Deductibles

• Copayments and coinsurance

• Costs paid during the initial coverage and catastrophic phases

However, it’s important to note:

• The cap only applies to covered drugs.

• You must use in-network pharmacies and follow plan rules.

• Non-covered medications still require full out-of-pocket payment.

Understanding the Part D Coverage Phases in 2025

Medicare Part D now consists of three coverage phases:

1. Deductible Phase

You pay 100% of drug costs until you meet your deductible. In 2025, the maximum allowed deductible is $590. PSHB plans with integrated Part D coverage may apply this differently.

2. Initial Coverage Phase

After the deductible, your plan shares the cost with you. You pay a copayment or coinsurance for each drug. This continues until your total out-of-pocket costs reach $2,000.

3. Catastrophic Phase

Once you hit the $2,000 out-of-pocket maximum, your plan covers 100% of your drug costs for the rest of the calendar year. No additional payment is required for covered prescriptions.

Not All Drugs Are Included

While the $2,000 cap offers much-needed relief, it only applies to drugs that are on your plan’s formulary. Each PSHB plan that includes Medicare Part D coverage uses its own formulary—a list of covered medications grouped by tiers.

You should review:

• Which tier your drugs are listed under: Lower tiers typically cost less out of pocket.

• Any utilization requirements: Some drugs require prior authorization, step therapy, or quantity limits.

• Formulary exclusions: If a drug isn’t on the list, it isn’t counted toward the $2,000 cap, and you will pay the full retail cost.

The Role of the Medicare Part D EGWP in PSHB Plans

As a Postal Service retiree or annuitant enrolled in a PSHB plan, you receive your Medicare Part D benefits through an Employer Group Waiver Plan (EGWP). This is a type of group Medicare prescription drug plan managed by the PSHB carrier in coordination with Medicare.

Advantages of the EGWP model include:

• Automatic enrollment: If you are eligible for Medicare and enrolled in a PSHB plan with prescription drug coverage, you’re automatically enrolled in the EGWP.

• Coordination with Medicare Part B: If you enroll in Medicare Part B, some plans waive or reduce deductibles and coinsurance.

• Access to a broader pharmacy network: Many EGWP plans include nationwide access to preferred pharmacies.

But even with these benefits, the specific medications covered may differ between plans. Always consult your plan’s formulary.

How to Make Sure Your Medications Are Covered

You should proactively take the following steps every year:

• Review your plan’s formulary during the PSHB Open Season (November to December).

• Confirm whether your prescriptions are covered, and if so, at what tier.

• Check for any changes communicated in the Annual Notice of Change (ANOC) letter.

• Ask if generics are available and whether your plan covers them at a lower cost.

• Evaluate whether a different PSHB plan better fits your prescription needs.

Even though the $2,000 cap can be financially beneficial, staying within your plan’s coverage rules is essential to avoid unnecessary costs.

Penalties for Opting Out or Late Enrollment

You might consider opting out of Medicare Part D coverage, especially if you’re still under a PSHB plan. However, this can come with serious drawbacks:

• Loss of drug coverage under PSHB: If you decline enrollment in the Part D EGWP, you will not have any prescription drug benefits under your PSHB plan.

• Late enrollment penalties: If you enroll in Part D later and didn’t have creditable drug coverage, you could face a lifelong monthly penalty.

• Limited re-enrollment windows: If you opt out, you may not be able to rejoin until the next Open Season or under a special enrollment period.

If you’re Medicare-eligible, enrolling in both Medicare Part B and your PSHB EGWP plan offers the most complete benefits package.

What Medicare Part B Has to Do with It

Many PSHB plans enhance your benefits if you enroll in Medicare Part B. For example:

• Plans may reduce or eliminate deductibles.

• Copayments and coinsurance may be lower.

• Some plans reimburse part or all of your Part B premium.

This combination with EGWP prescription coverage ensures you’re getting the maximum value from your plan. If you delay Part B enrollment and later decide to enroll, you could face penalties and reduced benefits.

Insulin, Vaccines, and Other Preventive Drugs

Certain categories of medications receive special treatment under Medicare Part D:

• Insulin: Covered insulin products are capped at $35 per month, even before reaching the $2,000 cap.

• Vaccines: Medicare Part D covers many recommended adult vaccines, including shingles and Tdap, with no out-of-pocket cost.

• Preventive medications: Drugs for managing chronic conditions, like statins and blood pressure medications, may have reduced copays depending on your plan.

It’s essential to verify these benefits with your specific PSHB EGWP plan to ensure eligibility and cost protections.

What to Expect During the PSHB Open Season

The annual PSHB Open Season runs from November through December. During this window:

• You can compare PSHB plans, especially their prescription drug formularies.

• You can change plans if your current plan no longer covers your medications.

• You will receive important documents like the ANOC and Summary of Benefits.

Take this time seriously. Even small formulary changes could affect whether you hit the $2,000 cap efficiently or struggle with uncovered drug costs.

The New Prescription Payment Plan Option

Starting in 2025, you can also opt into a new Medicare Prescription Payment Plan (PPP), which allows you to spread your out-of-pocket drug expenses over the calendar year in monthly installments.

This program:

• Helps you avoid large one-time costs early in the year

• Is optional and requires enrollment through your Part D plan

• Applies only to covered prescriptions

This feature can be particularly useful if you hit the $2,000 cap early in the year and want to manage your budget more smoothly.

Why Annual Review Is Now More Important Than Ever

Even with the $2,000 out-of-pocket cap, overlooking your plan’s drug coverage details can lead to unnecessary expenses. A drug you rely on today may be removed or re-tiered next year. That’s why:

• Your plan’s drug list should be part of your annual benefits check-up.

• Reevaluate your plan each year, even if you’re satisfied now.

• Talk to a licensed agent listed on this website for support if you feel overwhelmed.

Ignoring these changes can cost you more in both premiums and drug costs.

Stay Ahead of the Fine Print

Medicare Part D in 2025 offers more cost protection than ever before, especially with the $2,000 out-of-pocket maximum. But the safeguard only applies to what’s inside the scope of your plan. As a PSHB enrollee, you have access to valuable benefits through your EGWP, but those benefits depend on your awareness and proactive planning.

If you want to avoid surprises at the pharmacy counter, now is the time to:

• Review your PSHB plan options

• Understand your plan’s drug formulary

• Ask about Medicare Part B coordination

For one-on-one support tailored to your unique situation, reach out to a licensed agent listed on this website. They can help you evaluate plan options and confirm whether your medications are covered under the current formulary.