Budget Impact Analysis

Budget impact analysis (BIA) estimates the financial consequences of adopting and diffusing a new health technology within a specific budget holder's setting over a defined, usually short, time horizon. Where cost-effectiveness analysis asks whether a technology offers good value, BIA asks whether — and how — the system can afford it, by projecting the change in total expenditure for the relevant population.

Definition

Budget impact analysis is an economic evaluation that estimates the expected change in expenditure for a defined budget holder following the adoption of a new health technology, comparing total costs of the current treatment mix with those of the anticipated mix over a short time horizon.

Scope

This entry covers the purpose, structure, and inputs of a BIA: the budget-holder perspective, the eligible population and uptake assumptions, the comparison of 'world without' and 'world with' the new technology, the short time horizon, and the typical absence of discounting. BIA is presented as a complement to cost-effectiveness analysis within HTA. It is a methodological reference and does not provide pricing, procurement, or treatment recommendations.

Core questions

• Who is the budget holder and what is the relevant population size and eligibility?
• What is the current treatment mix and what mix is expected after adoption (uptake)?
• What is the difference in total expenditure between these scenarios, year by year?
• How sensitive is the projection to uptake, price, and population assumptions?

Key concepts

• Budget-holder perspective
• Eligible population and market uptake
• 'World without' versus 'world with' comparison
• Short time horizon (typically 1-5 years)
• Undiscounted, calendar-time projections
• Scenario and sensitivity analysis
• Complementarity with cost-effectiveness analysis

Mechanisms

A BIA defines the budget holder and the size of the eligible population, then models two scenarios: the expected mix of treatments without the new technology and the mix after its introduction, given assumptions about uptake over time. The difference in total costs between these scenarios — typically reported per year over a short horizon and usually without discounting — is the budget impact. ISPOR Good Practice guidance specifies the recommended structure, inputs, and reporting: the original task force report (Mauskopf et al., 2007) and its update (Sullivan et al., 2014) emphasise the budget-holder perspective, realistic uptake, and extensive scenario and sensitivity analysis to reflect local conditions. BIA is intended to sit alongside, not replace, cost-effectiveness analysis in informing adoption decisions.

Clinical relevance

BIA informs whether health systems and payers can absorb the cost of adopting a technology that has been judged effective and cost-effective, helping explain affordability constraints on coverage. It is a reference method describing system-level financial planning and does not bear on individual patient care.

Evidence & guidelines

Methods are guided by the ISPOR Principles of Good Practice for Budget Impact Analysis (Mauskopf et al., 2007) and the updated Good Practice II report (Sullivan et al., 2014); standard economic-evaluation texts such as Drummond et al. (2015) situate BIA among full and partial economic evaluations.

History

As cost-effectiveness evidence became central to reimbursement, payers increasingly required a separate estimate of affordability, since a cost-effective technology can still strain a fixed budget. ISPOR convened task forces to standardise the method, issuing principles of good practice in 2007 and an updated Good Practice II report in 2014, which together established BIA as a routine companion to cost-effectiveness analysis in HTA submissions.

Debates

How should uptake and the comparator mix be modelled?

Budget impact estimates are highly sensitive to assumptions about how quickly a technology is taken up and what it displaces; choosing realistic, locally relevant uptake curves and comparator mixes is a persistent methodological challenge addressed through scenario analysis.

Key figures

• Josephine A. Mauskopf
• Sean D. Sullivan
• Michael Drummond

Seminal works

• sullivan-2014
• mauskopf-2007

Frequently asked questions

How does budget impact analysis differ from cost-effectiveness analysis?

Cost-effectiveness analysis asks whether a technology offers good value for its added health benefit, while budget impact analysis asks whether a specific budget holder can afford it, projecting the change in total expenditure over a short time horizon.

Why does budget impact analysis usually not discount future costs?

Because its purpose is to show actual expenditure flows year by year for budget planning over a short horizon, it typically reports undiscounted costs in calendar time rather than present-value terms.