Key Takeaways

• Medicare Part D in 2025 offers better protection with a $2,000 cap on out-of-pocket prescription costs, but it doesn’t eliminate all expenses.

• If you’re a Postal Service Health Benefits (pshb) enrollee, your coverage coordinates with Medicare Part D through an EGWP, but that doesn’t mean every drug or cost is fully covered.

Understanding What Part D Covers in 2025

Medicare Part D in 2025 provides important prescription drug coverage and continues to evolve with meaningful updates. For PSHB enrollees who are also eligible for Medicare, understanding how Part D works—and how it connects to your PSHB drug benefits—is crucial. You may receive Part D coverage through an Employer Group Waiver Plan (EGWP) tied to your PSHB plan, but you’re still responsible for certain out-of-pocket costs.

Let’s start with the basics. Medicare Part D has three core phases:

• Deductible Phase: In 2025, you must pay the first $590 of your drug costs unless your plan provides first-dollar coverage.

• Initial Coverage Phase: After meeting the deductible, you typically pay a percentage of drug costs (coinsurance or copayments) until your total out-of-pocket spending reaches $2,000.

• Catastrophic Phase: Once you hit $2,000 in out-of-pocket costs, your Part D plan pays 100% of your covered drug expenses for the rest of the calendar year.

While the catastrophic phase now starts earlier, thanks to the out-of-pocket cap, it doesn’t mean all your pharmacy visits will be free of charge.

What You Still Have to Pay at the Pharmacy

Even with improvements in 2025, you will still encounter costs like:

• Copayments and coinsurance before you reach the $2,000 limit.

• Premiums for Medicare Part D coverage (typically handled through your PSHB plan, but still a factor).

• Non-covered medications or medications not on your plan’s formulary.

• Costs for brand-name drugs during the initial phase, which may be higher than generic alternatives.

• Pharmacy network restrictions, which may result in higher costs if you use an out-of-network pharmacy.

How the $2,000 Cap Works in Practice

The $2,000 annual cap in 2025 is a major shift. In previous years, beneficiaries could spend over $3,000 or more out-of-pocket before reaching catastrophic coverage. Now, once your spending hits $2,000 on covered Part D medications:

• You enter the catastrophic phase immediately.

• Your plan covers all approved prescription drug costs for the rest of the year.

However, this cap only applies to covered drugs. Any medication not on your plan’s formulary or any cost-sharing that doesn’t count toward the true out-of-pocket (TrOOP) threshold won’t help you reach that limit.

PSHB and EGWP: What It Means for You

As a PSHB enrollee, your drug coverage may be delivered through an Employer Group Waiver Plan (EGWP). This is a Medicare Part D plan designed specifically for retirees of large employer groups. Here’s what that means:

• Automatic enrollment if you are Medicare-eligible and enrolled in a PSHB plan.

• Integrated coverage with your PSHB plan that includes additional support for prescription drugs.

• No need to shop for a separate Part D plan. Your PSHB plan handles this.

• Extra benefits such as a $35 monthly insulin cap or preferred pharmacy networks, depending on your plan.

Still, not all drugs are covered the same way, and certain conditions apply. Opting out of the EGWP drug coverage typically results in a loss of pharmacy benefits under PSHB.

Important Cost Details to Track

The structure of Part D costs in 2025 includes:

• Deductible: Up to $590 annually, unless your PSHB-integrated Part D plan offers first-dollar coverage.

• Cost-sharing: Copays or coinsurance typically apply during the initial coverage phase.

• Out-of-pocket maximum: Once you hit $2,000, you move into full coverage.

Keep in mind:

• Only true out-of-pocket costs count toward the $2,000 limit.

• Manufacturer discounts and some plan contributions may help you reach the cap faster.

• Premiums don’t count toward your $2,000 cap.

What’s Not Covered—or Not Counted

Even with comprehensive drug coverage, there are still holes you need to be aware of:

• Over-the-counter medications are not included.

• Drugs excluded from Medicare coverage (such as cosmetic or fertility drugs) won’t count toward your out-of-pocket maximum.

• Foreign pharmacy purchases generally don’t apply.

• Late enrollment penalties, if applicable, may apply if you delayed enrollment in Part D without other creditable coverage.

The New Medicare Prescription Payment Plan

Another 2025 update is the Medicare Prescription Payment Plan. If you expect to hit high out-of-pocket drug costs early in the year, you can:

• Elect to spread your prescription costs monthly instead of paying large sums all at once.

• Enroll through your plan or pharmacy and begin monthly installment payments.

• Avoid financial strain from reaching the $2,000 cap quickly.

This can be helpful if you require high-cost medications early in the calendar year and want to budget your expenses over time.

What If You Opt Out of Part D?

For PSHB retirees, opting out of Medicare Part D generally means losing prescription coverage under your PSHB plan. Exceptions are limited, and re-enrollment is restricted. You should only consider opting out if you:

• Have other creditable drug coverage through VA or TRICARE.

• Fall under an exemption, such as living abroad.

In most cases, remaining enrolled is the only way to maintain comprehensive prescription benefits.

Timing and Enrollment Considerations

Enrollment into PSHB-integrated Medicare Part D coverage typically happens automatically when you:

• Become Medicare-eligible,

• Are enrolled in a PSHB plan,

• Do not actively decline coverage.

For 2025, the Open Season for PSHB occurred in November and December 2024. This is when you could choose your PSHB plan and review any associated Part D drug coverage.

Outside of Open Season, changes are generally allowed only during:

• Qualifying Life Events (QLEs), such as marriage or moving,

• Your Initial Enrollment Period when turning 65,

• Special Enrollment Periods if losing other drug coverage.

Missing these windows can delay access and may result in penalties or gaps.

Coordinating Part D With Other Benefits

If you’re enrolled in Medicare Part B and a PSHB plan with EGWP Part D coverage:

• You benefit from integrated cost savings through both systems.

• Lower drug costs may apply if your plan offers additional subsidies.

• Reduced cost-sharing often applies when you combine Part B and Part D.

But you must stay enrolled in both Medicare and your PSHB plan to keep this coordination. Dropping Part B or opting out of Part D can disrupt this balance and result in higher out-of-pocket costs.

Final Thoughts on Staying Covered Under PSHB

The improvements to Medicare Part D in 2025—including the $2,000 out-of-pocket cap—are significant, but they don’t erase every cost at the pharmacy counter. As a PSHB enrollee, you benefit from built-in access to Part D through your EGWP plan, but the details matter. Not every drug is covered, and your total costs can still vary depending on the medications you use, your plan’s formulary, and whether you stay in-network.

Understanding how your PSHB plan works with Medicare Part D gives you better control over your expenses. If you’re nearing Medicare eligibility or want to explore your current options, it’s smart to discuss your coverage with a licensed agent listed on this website. They can walk you through your PSHB plan’s drug coverage and ensure you stay protected.