Out-of-pocket expenses

Out-of-pocket expenses (or out-of-pocket costs) are direct outlays of cash which 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, 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.

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).^[1]

Out-of-pocket costs are high especially when it comes to prescription drugs in the United States.^[2] 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.^[3][4][5] 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.^[6][7]

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.^[8]

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.^[9]

References

1. McWilliams JM, Meara E, Zaslavsky AM, Ayanian JZ (2007). "Use of health services by previously uninsured Medicare beneficiaries.". N Engl J Med 357 (2): 143–53. doi:10.1056/NEJMsa067712. PMID 17625126.
2. Hurd MD, Martorell P, Delavande A, Mullen KJ, Langa KM (2013). "Monetary costs of dementia in the United States.". N Engl J Med 368 (14): 1326–34. doi:10.1056/NEJMsa1204629. PMC 3959992. PMID 23550670.
3. Zullo, AR; Howe, CJ; Galárraga, O (2 February 2016). "Estimating the Effect of Health Insurance on Personal Prescription Drug Importation.". Medical care research and review : MCRR. PMID 26837427.
4. Kogan MD, Newacheck PW, Blumberg SJ, Ghandour RM, Singh GK, Strickland BB, et al. (2010). "Underinsurance among children in the United States.". N Engl J Med 363 (9): 841–51. doi:10.1056/NEJMsa0909994. PMID 20818845.
5. Zullo, Andrew R.; Dore, David D.; Galárraga, Omar (March 2015). "Development and validation of an index to predict personal prescription drug importation by adults in the United States". Journal of Pharmaceutical Health Services Research 6 (1): 33–41. doi:10.1111/jphs.12088. Retrieved 27 July 2015.
6. Baicker K, Taubman SL, Allen HL, Bernstein M, Gruber JH, Newhouse JP, et al. (2013). "The Oregon experiment--effects of Medicaid on clinical outcomes.". N Engl J Med 368 (18): 1713–22. doi:10.1056/NEJMsa1212321. PMC 3701298. PMID 23635051.
7. The Impact Of Medicare Part D On Prescription Drug Use By The Elderly. Content.healthaffairs.org. Retrieved on 2011-04-17.
8. Islam, MM, Yen, L,Valderas, JM, and McRae,I (2014). "Out-of-pocket expenditure by Australian seniors with chronic disease: the effect of specific diseases and morbidity clusters". BMC Public Health 14: 1008. doi:10.1186/1471-2458-14-1008. PMID 25260348.