Can I Use FSA for Last Year’s Hospital Bill? Run-Out Period Rules

You can use an FSA for last year’s hospital bill, but only if the medical service itself took place during the plan year your FSA covered, and only if you file the claim before your plan’s run-out period ends. The IRS looks at the date the care was delivered, not the date the bill arrived. A December surgery billed in February is a prior-year expense, and only your prior-year FSA balance can reimburse it.¹

The Date of Service Decides Which Year’s FSA Pays

The IRS treats a medical expense as “incurred” on the day the provider actually delivered the service. It doesn’t matter when the hospital cut the invoice, when your insurer finished adjudicating the claim, or when you paid your portion. If the surgeon operated on November 15, that expense belongs to the plan year that includes November 15.

So this year’s fresh FSA dollars generally can’t reimburse last year’s hospital stay. The funds and the service date have to belong to the same plan year. Your plan administrator will check the date of service on every claim, and a mismatch will get it rejected.¹

Insurance delays are where people get tripped up. A late-November visit might not produce a final patient-responsibility bill until February or March, once the insurer has processed the claim. That timeline doesn’t change anything. The expense was incurred in November, so November’s FSA balance is the one that has to pay it, assuming you had money left there.

Your Real Deadline: The Run-Out Period

The run-out period is the window after the plan year ends during which you can still submit claims for services that happened during that prior plan year. This is the deadline that matters for a bill you’re holding from last year. Many plans set it at 90 days, so a plan year ending December 31 would have a claim-filing deadline around March 31. Some employers allow longer.

If you had a covered service in October but didn’t get the final bill until January, you have until the end of the run-out period to submit the claim against last year’s FSA balance. Miss the window and those funds are forfeited, even though the expense was legitimately incurred during the plan year.

The exact length is set by your employer, so pull your benefits summary or ask HR for your specific date. Treat it as a hard cutoff.

When Last Year’s Balance Can Still Cover a New Service

Some employers add a grace period to the FSA, which is different from the run-out period. A grace period gives you up to two months and 15 days after the plan year ends to incur new eligible expenses against your old balance. For a plan year ending December 31, that window runs through March 15.²

That means if you had leftover FSA money at the end of December and your plan includes a grace period, a January doctor visit or a February lab bill can be paid from last year’s remaining balance. A service in April, though, is too late, even if your prior-year balance still had money on December 31.

Grace periods are optional. Not every plan has one. If yours doesn’t, the prior-year balance can only reimburse services actually delivered during the prior plan year, and unused money is forfeited once the run-out period closes.

A Carryover Won’t Pay Last Year’s Bill Either

Instead of a grace period, some plans offer a carryover, which lets you roll a limited portion of your unused FSA balance into the next plan year. Carryover funds behave differently from grace period funds in one way that matters here: they become part of the new plan year’s balance, so they can only reimburse services delivered in the new plan year. A December hospital bill can’t be paid with carried-over dollars. You have to file that December claim against the prior year’s balance during the run-out period.

An employer can’t offer both a grace period and a carryover for the same FSA. The IRS prohibits that combination.² Your plan has one, the other, or neither, so check the plan documents to know which set of rules applies.

If You Left the Job Before the Service

Once your employment ends, your FSA can generally only reimburse eligible services that occurred before your termination date. A November hospital bill isn’t reimbursable if you left the company in August, even if there was still money in the account.

Most plans give you a limited window after termination to file claims for services that happened before you left. This varies by employer but is commonly around 90 days. Anything remaining after that is forfeited.

COBRA is the exception. If you elect COBRA continuation for your health FSA, you can keep participating through the end of the original plan year and be reimbursed for new expenses incurred while covered. You’ll pay the full contribution amount plus a 2% administrative fee, so it usually only makes sense when your remaining balance clearly exceeds what you’d pay in premiums.

Documentation Your Claim Needs

To get a prior-year hospital bill reimbursed, you need clear proof that the service happened during the correct plan year. That’s either an itemized statement from the hospital or an Explanation of Benefits from your insurer. It should show the provider’s name, the patient’s name, the date the service was performed, a description of what was done, and the amount you owe after insurance.

The date of service is what the plan administrator will scrutinize hardest. If your bill lumps multiple dates together or shows only a billing date, ask the hospital for an itemized statement that breaks out each service date individually. For a multi-day stay, both the admission and discharge dates should appear. Getting the paperwork right the first time matters more as the run-out window shrinks.

Most plans accept claims through an online portal or mobile app, and some still take submissions by mail or fax. Reimbursement usually arrives by direct deposit or check within a couple of weeks of approval.

If the Claim Is Denied

You have the right to appeal a denial. Federal rules require your plan to give you at least 180 days from the date you receive the denial notice to file that appeal.³

The most common reason prior-year bills get denied is a date-of-service mismatch. Before appealing, confirm your documentation clearly shows the service date falling inside the correct plan year. If the problem was incomplete paperwork, submitting a corrected itemized statement often resolves it without a formal appeal.

For a formal appeal, put the request in writing and attach any supporting documentation. The plan has to review it independently, meaning the reviewer can’t simply defer to whoever denied the claim initially. A decision must come within 30 days for claims involving services you’ve already received.³

Quick Scenarios

December surgery, February bill: incurred in December. File against last year’s FSA during the run-out period. This year’s balance can’t be used.
January surgery, prior-year balance still has money, plan has a grace period through March 15: last year’s leftover funds cover the January service.
January surgery, prior-year plan uses carryover instead: the carried-over money is now current-year money and pays the January bill as a current-year expense.
November hospital stay, you left the company in October: not reimbursable unless you elected COBRA for the FSA.
March bill for a September service, run-out ends March 31: still reimbursable if you file before the deadline.

Three pieces of information will tell you exactly what to do with a hospital bill from last year: the date of service on the itemized statement, whether your plan offers a grace period or a carryover, and the exact date your run-out period ends.

1
Internal Revenue Service. Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans
2
IRS. Notice 2013-71 – Modification of Use-or-Lose Rule For Health Flexible Spending Arrangements
3
U.S. Department of Labor. Benefit Claims Procedure Regulation FAQs