Key Takeaways

• The new $2,000 annual out-of-pocket cap under Medicare Part D in 2025 offers meaningful relief—but only after you reach it. Costs leading up to the cap can still add up quickly.

• PSHB enrollees with Medicare need to be aware of the fine print, including formulary exclusions, tiered cost structures, and prior authorization rules, all of which can result in higher or unexpected costs.

The $2,000 Cap Isn’t a Silver Bullet

As of 2025, Medicare Part D now includes a $2,000 annual out-of-pocket cap for prescription drugs. This change helps many retirees and employees under the Postal Service Health Benefits (PSHB) Program, especially those managing chronic conditions. But while this cap represents progress, it doesn’t eliminate the financial challenges entirely.

You still pay your way through several phases before reaching the cap:

• Deductible phase: You may pay up to $590 out of pocket before your plan begins cost-sharing.

• Initial coverage phase: You typically pay coinsurance or copayments based on drug tiers.

• Catastrophic phase (after hitting $2,000): Your plan covers all additional costs for the year.

Reaching the cap is a financial burden in itself—and it doesn’t always happen in a straight line. Certain medications may drive you there quickly, but many people with lower or fluctuating prescription needs may never hit it, even while still paying more than expected.

Drug Tiers Still Matter—A Lot

Even with the $2,000 limit, the tiered pricing model used by most PSHB-linked Part D plans continues to influence your costs dramatically. You’ll find:

• Tier 1: Preferred generics, usually lowest cost

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

• Tier 3-5: Preferred brands, non-preferred brands, and specialty drugs

The higher the tier, the higher your out-of-pocket costs. And if your prescribed drug falls into a higher tier—or if it gets reclassified during the plan year—you could be facing much more than expected. This matters especially for those on specialty medications, where costs can be substantial even in the initial phase.

Formularies Are Not All the Same

Each PSHB plan offering Medicare drug coverage has its own formulary—a list of covered drugs. These lists are reviewed annually and can change each year. Here’s what you need to watch for:

• Drug removal: If your medication is dropped from the formulary mid-year, you could be left paying the full retail price unless your doctor switches you to an alternative.

• Tier reassignments: A drug might be moved to a higher tier, increasing your cost.

• New prior authorization or quantity limits: These can delay access or require extra steps, which could affect your health and expenses.

You need to review your plan’s formulary every year during the Open Season from November to December. Small changes can mean big financial shifts.

Medicare Prescription Payment Plan Doesn’t Eliminate the Cost

To accompany the $2,000 cap, a new Medicare Prescription Payment Plan is now available. It lets you spread your drug costs out over the year in monthly installments. While this can ease your monthly budget, it does not reduce the total you owe.

This program can be helpful if you tend to hit the $2,000 cap early in the year, but you’ll still end up paying the full $2,000. You’re only rearranging the timeline—not shrinking the burden.

What You Pay Depends on Medicare Coordination

If you’re a Medicare-eligible PSHB enrollee, your total out-of-pocket drug costs will depend on how your PSHB plan coordinates with Medicare Part B and Part D. For example:

• Some PSHB plans offer enhanced coordination if you’re enrolled in Medicare Part B. This may mean lower copayments or waived deductibles for prescriptions.

• Others automatically enroll you in a Part D Employer Group Waiver Plan (EGWP), which includes the $2,000 cap but comes with its own rules and coverage specifics.

If you’re not enrolled in Medicare Part B when required, you could lose your PSHB drug coverage altogether. That makes it essential to understand your enrollment status and how it impacts your prescription drug protections.

Generic vs. Brand: It’s Not Always Up to You

Even if your doctor prescribes a brand-name drug, your plan might substitute it with a generic—unless your doctor specifically writes “dispense as written.”

But keep in mind:

• Some brand-name drugs have no generic equivalent

• Others may have multiple generic versions, with varying effectiveness or availability

• Plans may require step therapy, meaning you must try cheaper alternatives before they approve more expensive options

These rules can delay treatment or increase your costs if you bypass lower-tier options. Being proactive in communicating with your provider and reviewing your plan’s rules can make a difference.

Not All Pharmacies Offer the Same Price

Even within a PSHB Medicare drug plan, the pharmacy you use can impact how much you pay. Plans often have:

• Preferred pharmacies: Lower copayments and better negotiated rates

• Standard pharmacies: Higher out-of-pocket costs

• Mail-order options: Potential discounts, especially for maintenance drugs

Failing to use a preferred pharmacy could mean spending more—even for the same drug. Always check your plan’s preferred pharmacy list and explore mail-order options if they’re available and convenient.

Late Enrollment Can Still Haunt You

The $2,000 cap only helps if you’re enrolled in the right Medicare drug coverage. If you delay Medicare Part D enrollment without qualifying for a Special Enrollment Period, you could face lifetime late enrollment penalties.

These penalties add to your monthly Part D premium, compounding your costs indefinitely. That’s why enrolling on time—and staying continuously covered—is crucial.

Watch for Changing Plan Rules Each Year

Medicare drug plans under PSHB update their terms annually. You’ll receive an Annual Notice of Change (ANOC) each fall. This document outlines:

• Changes in premiums, copayments, or deductibles

• Shifts in drug tier placements or formulary changes

• New rules about prior authorizations or quantity limits

It’s your responsibility to review the ANOC and determine if your current plan still meets your needs. Open Season is the time to switch if it doesn’t.

The Importance of Reviewing Your PSHB + Medicare Pairing

In 2025, PSHB and Medicare are more interconnected than ever. For eligible annuitants and family members, staying enrolled in Medicare Part B and the PSHB plan that includes drug coverage is essential. Here’s what can go wrong if you ignore this pairing:

• You might lose access to integrated drug benefits

• You may not qualify for reduced cost-sharing or other savings

• You could face coverage gaps that leave you responsible for thousands in drug costs

The more you understand the link between PSHB and Medicare drug coverage, the more protected you are from financial surprises.

Your Drug Costs Might Be Capped—But They’re Not Predictable

Even though the $2,000 limit on out-of-pocket drug spending under Part D is a game-changer in 2025, it doesn’t mean your costs are easy to estimate. Formularies, pharmacy choices, drug tiers, and coordination rules between PSHB and Medicare all introduce variability.

You need to stay proactive by reviewing your plan each year, using preferred pharmacies, checking if your drugs remain covered, and understanding how Medicare enrollment status impacts eligibility.

For detailed help understanding your options, speak with a licensed agent listed on this website. A licensed agent can help you compare plans, avoid penalties, and make sure you get the prescription coverage that works for you.