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 ( North American English) or petrol ( Commonwealth English) is a petrochemical product characterized as a transparent, yellowish, and flammable liquid normally used as a fuel for spark-ignited internal combustion engines. When for ...
, parking fees and
tolls are considered out-of-pocket expenses for a trip.
Car insurance,
oil changes, and
interest
In finance and economics, interest is payment from a debtor 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 f ...
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 refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation i ...
of
capital goods
In economics, capital goods or capital are "those durable produced goods that are in turn used as productive inputs for further production" of goods and services. A typical example is the machinery used in a factory. At the macroeconomic level, ...
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 (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
, out-of-pocket expenses for such things as charity, medical bills, and education may be deductions on
US income taxes, according to
IRS
The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...
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 (United States), 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 enact ...
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 (medicine), ...
visits, hospitalization, or health utility score. Perhaps, some diseases will be more sensitive to Medicare Part D.
Australia
A 2014 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.
See also
*
Car costs
A car, or an automobile, is a motor vehicle with wheels. Most definitions of cars state that they run primarily on roads, seat one to eight people, have four wheels, and mainly transport people rather than cargo. There are around one bill ...
*
Capital good
Capital and its variations may refer to:
Common uses
* Capital city, a municipality of primary status
** Capital region, a metropolitan region containing the capital
** List of national capitals
* Capital letter, an upper-case letter
Econ ...
s
*
Personal finance
Personal finance is the financial management that an individual or a family unit performs to budget, save, and spend monetary resources in a controlled manner, taking into account various financial risks and future life events.
When planni ...
References
{{Insurance
Expense
Financial regulation