Key Takeaways

  • Although Medicare Part D is technically voluntary, skipping it can trigger significant penalties and major coverage gaps that are hard to fix later.

  • Even with recent 2025 reforms, you still face substantial costs, including premiums, deductibles, and coinsurance throughout your prescription drug coverage.

Understanding Why Medicare Part D Matters for PSHB Enrollees

As a Postal Service Health Benefits (PSHB) participant, you may feel well-insured. However, when you become eligible for Medicare, enrolling in Part D drug coverage remains crucial. Part D is designed to protect you from overwhelming prescription drug expenses, but it is not as “optional” as it might seem at first.

If you ignore Medicare Part D when first eligible, you will pay a late enrollment penalty that grows larger the longer you wait. This penalty is not a one-time fee. It gets added to your monthly premium and stays with you for life. In 2025, this penalty structure remains in place, making timely enrollment a smart financial move.

How Part D Fits with PSHB Prescription Drug Coverage

Starting in 2025, if you are a Medicare-eligible postal retiree enrolled in a PSHB plan, you are automatically enrolled in a Medicare Part D Employer Group Waiver Plan (EGWP). This helps coordinate your drug benefits with Medicare, potentially saving you money on copays and out-of-pocket costs.

However, even with this coordination, Part D still comes with important responsibilities and expenses you must understand:

  • You need to remain enrolled to keep your full PSHB benefits.

  • You are subject to Part D’s general cost-sharing rules, including deductibles and coinsurance.

  • You must maintain continuous coverage to avoid penalties if you ever leave PSHB and enroll in another Part D plan.

The Real Costs of Medicare Part D in 2025

While recent reforms bring relief for many enrollees, Medicare Part D in 2025 still demands attention to its cost structure.

Premiums

Everyone enrolled in Part D pays a monthly premium unless covered through specific employer-sponsored plans like PSHB’s EGWP. Even then, you might notice premium adjustments depending on your income. Higher-income beneficiaries pay an Income-Related Monthly Adjustment Amount (IRMAA) in addition to the basic premium.

Deductibles

In 2025, the standard Part D deductible rises to $590. You must pay this amount out-of-pocket before your plan starts contributing toward your drug costs.

Initial Coverage Phase

After meeting your deductible, you enter the initial coverage phase. You and your plan share the costs of your medications. Typically, you will pay about 25% coinsurance, but amounts vary based on your specific drug tier and plan agreements.

Catastrophic Coverage Phase

Thanks to 2025 changes, once your out-of-pocket spending on covered drugs reaches $2,000, you enter catastrophic coverage. After this point, your Part D plan covers 100% of your covered medication costs for the rest of the calendar year.

This new $2,000 cap greatly improves financial protection. However, reaching this cap can still involve significant upfront spending, especially for high-cost medications.

Late Enrollment Penalties: A Lifetime Cost

If you delay enrolling in Medicare Part D and do not maintain creditable prescription drug coverage through another source, you face a late enrollment penalty. Here’s what to know about it:

  • The penalty equals 1% of the “national base beneficiary premium” ($34.70 in 2025) multiplied by the number of full, uncovered months you were eligible but not enrolled.

  • The penalty is added to your monthly Part D premium permanently.

  • Even small delays can translate into significant lifetime costs.

Given that PSHB automatically enrolls Medicare-eligible enrollees into an EGWP, you are less likely to face this penalty, but it is essential to verify your enrollment.

How the Medicare Prescription Payment Plan Changes Things

In 2025, the Medicare Prescription Payment Plan allows you to spread your out-of-pocket costs over the calendar year instead of paying large lump sums at the pharmacy counter.

This payment option is especially beneficial if you anticipate hitting the $2,000 out-of-pocket cap early in the year. You can:

  • Pay monthly installments instead of facing one large bill.

  • Avoid sudden financial strain from expensive medications.

  • Better predict and budget your healthcare costs across the year.

Enrollment in the payment plan is optional, and you must actively sign up if you want to use it.

Part D Still Doesn’t Cover Everything

Although Part D helps with most outpatient prescription drugs, it does not cover all medications. You should be aware that:

  • Over-the-counter (OTC) drugs are typically not covered.

  • Certain vitamins, minerals, and supplements are usually excluded.

  • Drugs used for cosmetic purposes (like hair growth treatments) are not covered.

Each Part D plan, including PSHB EGWP plans, has its own formulary (list of covered drugs). If a medication is not on the formulary, you may have to request an exception or pay the full cost yourself.

Income Matters More Than You Think

If your modified adjusted gross income (MAGI) from two years ago exceeds specific thresholds, you must pay an additional amount on top of your Part D premium. For 2025:

  • Individuals earning over $106,000 and couples earning over $212,000 must pay IRMAA.

  • These additional charges range from about $12 to $76 per month, depending on income.

This income-related surcharge applies even if your plan is an EGWP under PSHB. Thus, even “group” coverage doesn’t shield you from IRMAA obligations.

Prescription Drug Coverage for Dual-Eligibles

If you qualify for both Medicare and Medicaid, known as “dual eligibility,” you may receive extra help with your Part D costs. In 2025, assistance includes:

  • Reduced or no premiums.

  • Lower or eliminated deductibles.

  • Reduced copayments for medications.

However, you still must enroll in a Medicare Part D plan to benefit from these cost-saving measures.

Common Mistakes to Avoid in 2025

When it comes to Medicare Part D and your PSHB benefits, a few mistakes can cost you dearly:

  • Assuming you do not need Part D because you have FEHB or PSHB coverage. (You still must enroll if you are Medicare-eligible.)

  • Forgetting to confirm your automatic enrollment in the PSHB EGWP.

  • Ignoring annual plan notices that list changes to the formulary, cost-sharing amounts, and coverage rules.

  • Not signing up for the Medicare Prescription Payment Plan if you expect high drug costs early in the year.

Stay proactive to avoid financial surprises.

Enrollment Windows You Must Watch

Timely action ensures your coverage stays intact and affordable:

  • Initial Enrollment Period (IEP): A 7-month window around your 65th birthday (three months before, the month of, and three months after).

  • Annual Enrollment Period (AEP): From October 15 to December 7 each year, when you can review and change your Medicare drug coverage.

  • Special Enrollment Periods (SEPs): Triggered by certain life events, like moving out of your plan’s service area or losing other drug coverage.

Under the PSHB transition rules, you typically remain enrolled automatically, but you should still review your coverage options each fall.

Preparing for the Long-Term Impact

Prescription drug needs often grow over time. Even if you take few or no medications now, securing Part D coverage protects your future health and finances.

As drug prices rise and new therapies become available, having robust drug coverage through Medicare Part D becomes more valuable every year.

In 2025 and beyond, failing to enroll properly or misunderstanding your costs can mean thousands of dollars lost over your retirement.

Your Next Steps for Smarter PSHB and Medicare Coordination

If you are approaching Medicare eligibility or already enrolled, make reviewing your Part D status a priority:

  • Confirm your enrollment in the PSHB EGWP.

  • Understand the current deductibles, copayments, and coinsurance under your plan.

  • Consider using the Medicare Prescription Payment Plan if you expect significant costs.

  • Plan ahead for possible income-related surcharges.

  • Always check your plan’s annual notices for important changes.

For personalized help choosing or managing your coverage, reach out to a licensed insurance agent listed on this website.