An out-of-pocket expense (or out-of-pocket cost, OOP) is the direct payment of money that may or may not be later reimbursed from a third-party source. For example, when operating a vehicle,

gasoline Gasoline (; ) or petrol (; ) (see ) is a transparent, petroleum-derived flammable liquid that is used primarily as a fuel in most spark-ignited internal combustion engines (also known as petrol engines). It consists mostly of organic co ...

, parking fees and tolls are considered out-of-pocket expenses for a trip. Car insurance,

oil An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...

changes, and

interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct ...

are not, since the outlay of cash covers expenses accrued over a longer period of time. The services rendered and other in-kind expenses are not considered out-of-pocket expenses; the same goes for

depreciation In accountancy, depreciation is a term that refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the a ...

capital goods The economic concept of a capital good (also called complex product systems (CoPS),H. Rush, "Managing innovation in complex product systems (CoPS)," IEE Colloquium on EPSRC Technology Management Initiative (Engineering & Physical Sciences Researc ...

or depletion. Organizations often reimburse out-of-pocket expenses incurred on their behalf, especially expenses incurred by employees on their employers' behalf. In the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...

, out-of-pocket expenses for such things as charity, medical bills, and education may be deductions on

US income taxes Income taxes in the United States are imposed by the federal government, and most states. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allowa ...

, according to

IRS The Internal Revenue Service (IRS) is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax ...

regulations. To be out of pocket is to have expended personal resources, often unexpectedly or unfairly, at the end of some enterprise.

Health financing

In the health care financing sector, this represents the share of the expenses that the insured party must pay directly to the health care provider, without a third-party (insurer, or government). United States Out-of-pocket costs are high especially when it comes to prescription drugs in the United States. Before investing in a health care plan, it is very useful to examine the out-of-pocket prescription costs as they may be very low or very high. High out-of-pocket costs may correlate with lower prescription adherence and more importation of medications from foreign countries.

Medicare Part D Medicare Part D, also called the Medicare prescription drug benefit, is an optional United States federal-government program to help Medicare beneficiaries pay for self-administered prescription drugs. Part D was enacted as part of the Medi ...

is a federal program aimed at lowering prescription drug costs for Medicare beneficiaries. However, after the first year of Medicare Part D, out-of-pocket drug costs were down, but there was not a noticeable reduction in

emergency department An emergency department (ED), also known as an accident and emergency department (A&E), emergency room (ER), emergency ward (EW) or casualty department, is a medical treatment facility specializing in emergency medicine, the acute care of pati ...

visits, hospitalization, or health utility score. Perhaps, some diseases will be more sensitive to Medicare Part D. Australia A recent study published from Australia shows that the out-of-pocket cost burden falls most heavily on patients who are least able to bear it, both in terms of their health and in terms of their income. Among the respondents 14% experienced a heavy financial burden. Medication and medical service expenses were the major costs. This study concluded that despite Australia's universal health coverage (medicare) a substantial portion of senior citizens suffer from excessive out-of-pocket expenditure, and this burden increases with increasing number of chronic conditions. Among the specific conditions, those who experienced cancer, high blood pressure, diabetes or depression were likely to report higher out-of-pocket expenditure. Some ways to improve physician knowledge of drug costs were thought to be increased physician-patient communication or higher use of information technology. Physicians with high rates of IT use did not have significantly higher knowledge or drug costs. Health IT design should be improved to make it easier for physicians to access cost information at the point of care.

References

{{Insurance Expense Financial regulation

Health financing

See also

References