Out-of-pocket medical expenses are any costs you pay for healthcare that aren’t reimbursed by insurance. This includes deductibles, copayments, and coinsurance for covered services, plus the full cost of any services your plan doesn’t cover. The term matters in three different contexts, and the answer shifts depending on which one you care about: what counts toward your insurance plan’s spending limit, what qualifies for tax deductions, and what you can pay for with tax-advantaged savings accounts like an HSA or FSA.
The Three Core Costs in Every Insurance Plan
Nearly every health insurance plan splits your out-of-pocket spending into three categories. Your deductible is the amount you pay each year before your insurance starts covering its share. Your copayment is a flat fee you pay at the time of a visit or prescription, like $30 for a specialist appointment. Your coinsurance is a percentage of a service’s cost that you owe after you’ve met your deductible, such as 20% of a surgery bill.
All three of these typically count toward your plan’s out-of-pocket maximum, the annual ceiling on what you can be required to pay. For 2026 Marketplace plans, that cap is $10,600 for an individual and $21,200 for a family. Once you hit it, your plan covers 100% of covered services for the rest of the year.
What Doesn’t Count Toward Your Limit
Several categories of spending come out of your wallet but never move you closer to that annual cap. Monthly premiums don’t count. Neither does anything you spend on services your plan doesn’t cover, out-of-network care, or amounts above what your plan considers the “allowed charge” for a service. That last one is sometimes called balance billing, where a provider charges more than the rate your insurer has negotiated.
This distinction catches people off guard. You might spend thousands on an out-of-network specialist or an uncovered treatment and still be far from your out-of-pocket maximum, because none of that spending registers against it.
Preventive Services You Shouldn’t Pay For
Under federal law, most health plans must cover a set of preventive services at zero cost to you when you use an in-network provider. This includes immunizations, certain screening tests, and wellness visits for adults, women, and children. You won’t owe a copayment or coinsurance for these services, even if you haven’t met your deductible yet. Coverage can vary by plan, so $0 cost isn’t guaranteed in every case, but the general rule is that routine preventive care should not add to your out-of-pocket spending.
Prescription Drug Tiers and Costs
Prescription drugs are one of the biggest sources of out-of-pocket spending, and what you pay depends on where your medication falls on your plan’s formulary. Most plans organize drugs into tiers. Tier 1, usually generic drugs, carries the lowest copayment. Tier 2 covers preferred brand-name drugs at a moderate cost. Tier 3 includes non-preferred brand-name drugs at a higher price. A specialty tier sits at the top for very high-cost medications, sometimes requiring coinsurance instead of a flat copay.
If you’re on Medicare Part D, a significant change took effect in 2025: the Inflation Reduction Act capped annual out-of-pocket prescription costs at $2,000. Once you hit that threshold, you pay nothing more for covered drugs for the rest of the year. This is separate from the out-of-pocket maximums on standard Marketplace plans.
What Counts for Tax Deductions
The IRS defines medical expenses more broadly than your insurance plan does. You can deduct unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income when you itemize deductions. The list of qualifying expenses goes well beyond doctor visits and prescriptions.
Eligible costs include diagnostic devices like blood sugar test kits, the purchase and care of service animals (including food, grooming, and veterinary bills), and qualified long-term care services. Long-term care qualifies when a licensed practitioner certifies that someone can’t perform at least two activities of daily living, such as bathing, dressing, eating, or toileting, without substantial help for at least 90 days. It also qualifies for individuals who need supervision due to severe cognitive impairment. Premiums for qualified long-term care insurance contracts count too, up to age-based limits.
Transportation to medical appointments, certain home modifications for medical reasons, and dental work all fall into the deductible category as well. The key test is whether the expense primarily treats, prevents, or diagnoses a medical condition rather than serving a general health or cosmetic purpose.
HSA and FSA Eligible Expenses
Health savings accounts and flexible spending accounts let you pay for medical costs with pre-tax dollars, but the list of “qualified medical expenses” they cover is broader than what your insurance plan tracks toward your deductible. HSA and FSA funds can cover copayments and coinsurance, but also items like adhesive bandages, sunscreen, mobility aids, and over-the-counter medications.
The main structural difference between the two accounts: an HSA requires enrollment in a high-deductible health plan and lets your balance roll over year to year. An FSA doesn’t require a specific plan type, but contributions are capped ($3,300 for 2025, $3,400 for 2026) and most unused funds expire at year’s end. Both accounts effectively reduce your real cost of out-of-pocket expenses by letting you pay with income that was never taxed.
How to Track What You’ve Spent
Your most reliable tracking tool is the Explanation of Benefits (EOB) your insurer sends after each claim. An EOB is not a bill. It breaks down what the provider charged, what your plan’s allowed charge was, what the insurer paid, and what you owe. The “Patient Balance” line is the amount you should expect on your actual bill. If the bill you receive is higher than that figure, contact your provider.
One important detail: an EOB shows what you owe, not whether you’ve already paid it. If you’re tracking spending toward your deductible or out-of-pocket maximum, you’ll need to compare EOBs against your actual payments. Save itemized bills alongside your EOBs. This documentation also matters if you plan to deduct medical expenses on your taxes or request reimbursement from an HSA or FSA, since you may need to prove the expense was medically necessary and not already covered by insurance.
Most insurers also provide a running total of your deductible and out-of-pocket progress through their online portal or app. Check this periodically, especially in the second half of the year, since reaching your out-of-pocket maximum means your plan picks up 100% of covered costs for the remainder of the plan year.