Out-of-pocket expenses are direct outlays of cash which may or may not 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, because 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, nor 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 federal 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 state).
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 seeing at they may be very low or very high. High out-of-pocket costs may correlate with lowered prescription adherence. 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-pocket drug costs were down but there was not a noticeable reduction in emergency room visits, hospitilization, or health utility score. Perhaps some diseases will be more sensitive to Medicare Part D.[1]
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.[2]