2025 Medicare Glossary

Prescription Drug Plan Terms and What They Mean

Income Related Monthly Adjustment Amount (IRMAA)

If your modified adjusted gross income as reported on your IRS tax return from 2 years ago is above a certain amount, you’ll pay the standard premium amount and an Income Related Monthly Adjustment Amount, also known as IRMAA. IRMAA is an extra charge added to your premium. Less than 5% of people with Medicare are affected, so most people will not pay a higher premium.

Initial Coverage Stage:

This is the stage before your out-of-pocket costs for the year have reached the out-of-pocket threshold amount.

Initial Enrollment Period:

When you are first eligible for Medicare, the period of time when you can sign up for Medicare Part A and Part B. If you’re eligible for Medicare when you turn 65, your Initial Enrollment Period is the 7-month period that begins 3 months before the month you turn 65, includes the month you turn 65, and ends 3 months after the month you turn 65. There is an exception: if your birthday falls on the first of any month, your 7-month IEP begins and ends one month sooner. For example, if your birthday is July 1, your 7-month IEP is the same as if you were born in June — beginning in March and ending in September.

Interchangeable Biosimilar:

A biosimilar that may be used as a substitute for an original biosimilar product at the pharmacy without needing a new prescription because it meets additional requirements related to the potential for automatic substitution. Automatic substitution at the pharmacy is subject to state law.

Late Enrollment Penalty (LEP):

If you do not have creditable prescription drug coverage, you will have to pay a late enrollment penalty in addition to your monthly plan premium. See Late Enrollment Penalty FAQs

List of Covered Drugs (Formulary or "Drug List"):

A list of prescription drugs covered by the plan.

Low Income Subsidy (LIS):