Key Takeaways

• The new $2,000 out-of-pocket cap on Medicare Part D drug spending in 2025 is a significant improvement, but not everyone will benefit equally from it.

• Postal Service Health Benefits (PSHB) enrollees who are Medicare-eligible should understand how their integrated drug coverage works to avoid unexpected costs.

What the $2,000 Cap Actually Means for You

As of January 1, 2025, Medicare Part D has introduced a $2,000 annual cap on out-of-pocket spending for prescription drugs. This change replaces the old catastrophic phase of coverage and aims to bring more financial predictability to beneficiaries. For many, this is a welcome relief. But for others, it could be misleading if taken at face value.

You might assume that once you hit $2,000 in spending, your prescription drug costs disappear for the rest of the year. However, the reality is more nuanced. How you reach that cap, what drugs count, and whether you’re enrolled in the Postal Service Health Benefits (PSHB) with Medicare integration all affect your actual savings.

How Drug Coverage Works in PSHB with Medicare

When you enroll in a PSHB plan and are Medicare-eligible, your drug coverage typically comes through a Medicare Part D Employer Group Waiver Plan (EGWP). This version of Part D is offered through your PSHB plan and includes special enhancements, such as:

• A $35 insulin copay cap for covered insulin products

• Access to a broader pharmacy network

• Enhanced coordination with your PSHB plan’s medical benefits

This integrated drug coverage means that your PSHB plan will apply the $2,000 out-of-pocket limit for Medicare-covered drugs, but only within the framework of what the plan deems covered and coordinated.

What Still Counts Toward Your Out-of-Pocket Limit

The $2,000 cap includes costs like:

• Your Part D deductible (up to $590 in 2025)

• Coinsurance and copayments for medications on your plan’s formulary

• Out-of-pocket costs for drugs obtained at in-network pharmacies

Once your true out-of-pocket (TrOOP) costs reach $2,000, your plan covers 100% of Medicare Part D-covered drug costs for the rest of the year.

But here’s where it gets complicated: not all your prescription expenses count toward that $2,000 threshold.

Why Some Drug Costs Don’t Count Toward the Cap

Even with this new cap, there are situations where you’re still on the hook for drug costs. Here are a few:

• Non-formulary drugs: If you’re prescribed a medication that isn’t listed on your plan’s formulary, it likely won’t count toward your cap. You may have to pay the full retail price.

• Out-of-network pharmacy use: Filling a prescription at a pharmacy outside your plan’s network might result in full out-of-pocket costs that don’t apply to the $2,000 cap.

• Excluded medications: Some over-the-counter medications, vitamins, or drugs for weight loss or cosmetic purposes may not be covered under Part D at all.

• Drugs not meeting Medicare’s definition of “medically necessary”: If the drug is denied during the coverage determination process, even with a doctor’s prescription, you could pay the entire cost.

PSHB Plan Design Affects Your Final Costs

Your total prescription costs under PSHB will also depend on your specific plan’s:

• Formulary tiers

• Network rules

• Prior authorization requirements

• Step therapy protocols

Some PSHB plans may offer cost-sharing assistance or coordinate better with Medicare Part D, but others may not. It’s critical to read the plan’s summary of benefits and Annual Notice of Change (ANOC) each year to see if any drug coverage terms have changed.

You Still Pay Premiums Even After Hitting the Cap

The $2,000 cap applies only to out-of-pocket drug costs. It does not eliminate:

• Your monthly Medicare Part D plan premium (which may be included in your PSHB premium)

• Any applicable late enrollment penalties

• IRMAA (Income-Related Monthly Adjustment Amount), if you’re a high-income beneficiary

These premiums and fees are separate from the $2,000 cap and continue regardless of your drug spending.

How the Medicare Prescription Payment Plan Works

Starting in 2025, enrollees in Medicare Part D also have the option to sign up for the Medicare Prescription Payment Plan. This allows you to pay your out-of-pocket prescription drug costs in monthly installments instead of at the pharmacy counter.

If you’re part of PSHB with integrated Medicare drug coverage, this feature may or may not be automatically available to you. You’ll likely need to opt in during the open enrollment period or when you reach the deductible phase.

This monthly installment option could help even out expenses if you have high medication costs early in the year, but it does not reduce the total amount you owe.

Medicare Enrollment Status Matters

Whether or not you’re enrolled in Medicare Part B affects your PSHB drug benefits. For many annuitants and eligible family members, enrolling in Part B is mandatory to maintain PSHB drug coverage. If you choose to opt out of Part B and remain in PSHB, you risk losing access to the integrated Part D benefits entirely.

In that case, you would be:

• Ineligible for the $2,000 cap under Medicare Part D

• Responsible for the full cost of prescription drugs not covered by the PSHB plan

• Barred from re-enrolling in the integrated Medicare drug plan until a future open enrollment or qualifying life event

Prescription Costs in the Real World Can Still Be Unpredictable

Even with a cap, PSHB enrollees can encounter unpredictable costs if:

• Their medications change mid-year

• Their drug drops off the formulary during the year

• They relocate and face a different network structure

• A new specialist prescribes a non-covered drug

It’s also important to note that brand-name drugs and specialty-tier medications often carry higher coinsurance even before hitting the cap. While the $2,000 ceiling brings relief, you might hit it faster with these high-cost prescriptions, but still face denials or delays depending on your plan’s approval process.

Planning During Open Season Is More Important Than Ever

The PSHB open season runs from November to December each year. During this time, you should:

• Review your plan’s formulary to confirm coverage of your medications

• Check cost-sharing tiers and pharmacy network lists

• Compare whether your current plan coordinates well with Medicare Part D

• Make adjustments based on your projected medical and prescription needs

If you’re already enrolled, you’ll be automatically mapped to a corresponding PSHB plan unless you actively make a change. Don’t let this default process catch you off guard if your needs or drug list have changed.

Coordination Between PSHB and Medicare Is the Key

PSHB enrollees benefit most when there’s a strong integration between the health plan and Medicare coverage. Plans that align well with Medicare Part B and Part D usually offer:

• Reduced or waived deductibles when both coverages are active

• Lower copays for drugs when Medicare is primary

• Enhanced pharmacy access and medication therapy management programs

Plans without strong Medicare coordination may still offer drug benefits but may not apply the full value of Medicare’s $2,000 out-of-pocket cap, particularly if the plan doesn’t wrap around Part D efficiently.

Take a Proactive Approach to Prescription Planning

Rather than assuming the $2,000 limit will automatically simplify everything, take the following steps:

• Create a list of all your current prescriptions

• Use your plan’s formulary to check tiers and coverage status

• Calculate your approximate annual out-of-pocket drug costs

• Reach out to your plan for clarification on drug-specific coverage limits

• Consider switching plans if the current one doesn’t support your needs under the new cap

Lower Spending Isn’t Guaranteed, But Smarter Planning Helps

While the $2,000 cap is a positive step, not everyone will experience lower overall spending. PSHB enrollees who rely on medications outside the standard Part D coverage path may find the cap offers little to no real savings.

You’ll benefit most if:

• Your drugs are on formulary and classified in lower tiers

• You fill prescriptions at in-network pharmacies

• You are enrolled in Medicare Part B and Part D under your PSHB plan

Understanding your coverage specifics and staying informed during open season is your best strategy.

What This Means for You as a PSHB Enrollee

The new $2,000 drug spending cap under Medicare Part D is a welcome shift in the broader landscape of prescription affordability, but it’s not a silver bullet. You must stay actively involved in your plan choices, understand what is and isn’t covered, and ensure your enrollment status meets PSHB requirements.

To make sure your plan fits your needs in 2025, speak to a licensed agent listed on this website. They can help you compare PSHB options that coordinate with Medicare and help minimize your out-of-pocket risk.