Key Takeaways

  • In 2025, Medicare Part D introduces a $2,000 annual out-of-pocket cap on prescription drug costs, bringing significant relief to PSHB participants enrolled in Medicare.

  • Despite this cap, you may still face monthly premium payments, plan deductibles, and potential costs for non-covered medications that aren’t included in the cap.

The New $2,000 Limit: What It Covers—and What It Doesn’t

Starting in 2025, the Medicare Part D landscape changes dramatically. A long-awaited policy now limits your out-of-pocket spending on prescription drugs to $2,000 per calendar year. If you’re a Postal Service Health Benefits (PSHB) enrollee who’s also on Medicare, this change affects how you plan your healthcare expenses.

While the cap sounds like a firm financial safety net, it’s crucial to understand what is included—and more importantly, what isn’t.

Included Under the Cap

The $2,000 cap applies only to true out-of-pocket costs for drugs covered under Medicare Part D. This includes:

  • The plan deductible (up to $590 in 2025)

  • Copayments and coinsurance you pay during the initial coverage phase

  • Any additional cost-sharing before reaching the $2,000 threshold

  • Catastrophic costs, which are now fully covered by the plan once the cap is hit

Excluded from the Cap

However, the following expenses do not count toward the cap:

  • Monthly Part D premiums

  • Costs for medications not covered by your Part D plan

  • Any prescription filled at an out-of-network pharmacy

  • Over-the-counter medications and non-prescription supplements

So while the cap does protect you from runaway drug costs for covered medications, it doesn’t eliminate all prescription-related expenses.

Understanding How the Cap Works Over the Year

The $2,000 cap is applied per calendar year. That means it resets every January 1. For example, if you spend $2,000 on qualifying Part D costs by June, you pay nothing more for covered drugs for the rest of that year. But when January arrives, your count restarts.

For some PSHB annuitants who rely on costly specialty drugs, this could mean hitting the cap early in the year and then experiencing several months without cost-sharing. For others, especially those with lower drug needs, the cap may never come into play at all—but premiums and deductibles still apply.

Monthly Payments Aren’t Going Away

Even though the $2,000 cap removes the financial uncertainty of catastrophic-level drug spending, your monthly Part D premium remains a fixed cost. You’ll still need to budget for this amount each month, even after your cost-sharing for medications ends.

Additionally, depending on your income level, you may be subject to the Income-Related Monthly Adjustment Amount (IRMAA), which raises your Part D premium.

If you’re in a PSHB plan that includes a Medicare Part D Employer Group Waiver Plan (EGWP), your plan may offer partial reimbursements or premium credits, but these vary and are not guaranteed.

Medicare Prescription Payment Plan: Helpful or Not?

Another change in 2025 is the introduction of the Medicare Prescription Payment Plan (MPPP). This allows you to spread out your out-of-pocket Part D costs over the year in monthly installments, instead of paying large amounts upfront.

While this can make your budgeting more predictable, it’s important to note:

  • You still owe the full $2,000 (if you reach the cap)

  • This is not a discount program; it’s a payment arrangement

  • It requires enrollment and approval

For PSHB members with consistent medication costs, MPPP may offer peace of mind. However, it doesn’t reduce the total amount owed.

Coverage Gaps Still Exist

The $2,000 cap applies only to drugs covered by your plan. If your doctor prescribes a medication that isn’t on your plan’s formulary, you may pay the full retail cost out of pocket.

You can request exceptions or switch to a formulary alternative, but:

  • Exceptions must be approved by the plan

  • They may take time to process

  • They’re not guaranteed

You should review your plan’s formulary annually during Open Season to confirm that your regular medications are still covered. This is especially important if you have chronic conditions that require maintenance drugs.

Cost-Sharing Before the Cap Kicks In

Before reaching the $2,000 cap, you’re responsible for:

  • Paying the plan deductible (up to $590 in 2025)

  • Copayments or coinsurance during the initial coverage phase

The structure looks like this:

  1. Deductible Phase: You pay 100% of your drug costs until you reach the deductible.

  2. Initial Coverage Phase: After the deductible, you share costs with the plan.

  3. Cap Reached: Once your out-of-pocket costs hit $2,000, the plan covers 100% of the cost for covered drugs for the rest of the year.

For many PSHB retirees, particularly those taking expensive brand-name or specialty medications, these first two phases could involve hundreds of dollars each month.

Not All Pharmacies Are Treated Equally

If you fill your prescriptions at a pharmacy that isn’t in your plan’s network, those costs don’t count toward your $2,000 cap. This is especially important for PSHB members who travel frequently or live in areas with limited pharmacy options.

To avoid unexpected costs:

  • Use the plan’s online tools or customer service to confirm network pharmacies

  • Refill prescriptions in advance if you’ll be traveling

  • Ask your doctor to write prescriptions that can be filled at preferred providers

Annual Plan Changes Matter More Than Ever

Each year, Part D plans change their:

  • Drug formularies (which drugs are covered)

  • Tier assignments (which affect copays)

  • Pharmacy networks

  • Cost-sharing amounts (copays, coinsurance)

PSHB enrollees need to review their Annual Notice of Change (ANOC) each fall. This document outlines all the changes for the coming year, and failing to review it can lead to surprise costs.

Even with the new cap in place, your 2025 expenses could increase if:

  • Your medications move to a higher tier

  • Your preferred pharmacy leaves the network

  • A previously covered drug is dropped

What If You Have Multiple Sources of Coverage?

Some PSHB retirees have dual coverage: Medicare Part D and TRICARE or other retiree drug coverage. In these cases, coordination of benefits rules determine which plan pays first.

Important notes:

  • Only the costs you pay out of pocket count toward the $2,000 cap

  • Payments made by other insurance may not count toward the limit

  • You must verify with both plans how coordination works to avoid unexpected denials

Extra Help and LIS Still Apply

If you qualify for Extra Help (also called the Low-Income Subsidy or LIS), your drug costs may already be well below the $2,000 cap. In 2025, these programs still exist and continue to reduce or eliminate:

  • Deductibles

  • Premiums

  • Copayments

However, eligibility is based on income and resources. If you lose eligibility due to income changes, your costs could increase significantly—so it’s essential to recertify on time.

How PSHB Plans Fit Into All of This

For Postal retirees enrolled in PSHB plans with integrated Medicare Part D coverage, the $2,000 cap applies within your Part D benefit. Many of these plans operate under an EGWP structure, meaning:

  • Drug coverage is managed by a Medicare-approved employer group plan

  • Formularies and networks may differ from individual Part D plans

  • The $2,000 cap still applies, even though the plan is employer-sponsored

Some PSHB EGWP plans may also offer:

  • Lower cost-sharing if you’re enrolled in Medicare Part B

  • Enhanced benefits such as insulin cost caps or expanded pharmacy networks

You should not assume all PSHB plans offer identical benefits, even if they comply with Medicare rules. Review your Summary Plan Description and ANOC every year.

Where Things Could Still Go Wrong

Even in 2025, problems can arise if you:

  • Skip the annual review of your plan documents

  • Don’t understand what counts toward the $2,000 cap

  • Use out-of-network or non-formulary drugs

  • Assume all costs stop after reaching the cap (they don’t)

  • Miss re-certification for Extra Help or other subsidies

These mistakes can turn a promising cost cap into a false sense of security.

Stay Ahead of the Risks

The $2,000 cap in 2025 represents a major improvement in Medicare’s affordability—but it is not foolproof. As a PSHB enrollee, you must stay informed about:

  • What your plan covers

  • How costs accumulate

  • What you’ll still need to budget for

Being proactive—especially during Open Season—is your best defense against surprises.

Take Control of Your Part D Coverage in 2025

The $2,000 annual cap on Medicare Part D out-of-pocket costs is a welcome relief, but it doesn’t eliminate the need for careful planning. You still need to consider monthly premiums, plan networks, drug formularies, and income-related adjustments.

If you’re unsure how your PSHB plan works with Medicare Part D—or whether you’ll benefit from additional programs like Extra Help or the new Prescription Payment Plan—it’s time to seek personalized guidance.

Reach out to a licensed agent listed on this website who understands both Medicare and PSHB. They can walk you through your options, explain the financial impact, and help you stay protected throughout 2025 and beyond.