Out-of-pocket expenses

An out-of-pocket expenses (or out-of-pocket cost) is the direct outlays of cash that may be later reimbursed.

In operating a vehicle, gasoline, parking fees and tolls are considered out-of-pocket expenses for the trip. Insurance, oil changes, and interest 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 are depreciation of capital goods 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, out-of-pocket expenses for such things as charity, medical bills, and education may be deductions on US income taxes, according to IRS regulations.

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

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).

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 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 room visits, hospitalization, or health utility score. Perhaps, some diseases will be more sensitive to Medicare Part D.

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