When does a ministry need a budget impact analysis?

A new vaccine, medicine or service can be good value and still be unaffordable in the first few years. Budget impact analysis (BIA) is the tool that tells a ministry of health or an insurer what adopting an intervention will cost its own budget, year by year. It complements cost-effectiveness analysis rather than replacing it.

Five situations where a BIA is needed

1. Adding an intervention to a benefit package or essential medicines list. The committee needs to know the annual cost of coverage, not only whether the intervention is good value.
2. Introducing a new programme, such as a vaccine. Planning and financing the first years depend on the expected number of people treated and the cost per person.
3. Scaling up. When coverage expands, budget impact shows how fast costs rise and when savings, if any, appear.
4. Setting insurance contributions, subsidies or tariffs. The cost of changes to the package feeds directly into contribution and subsidy decisions.
5. Responding to a submission. When a manufacturer or partner proposes a product, an independent BIA with local data tests their estimates.

What a good BIA contains

• The budget holder’s perspective — only the costs that fall on the ministry’s or insurer’s budget.
• A short time horizon — usually one to five years, shown year by year.
• The eligible population — based on local data, and how it changes over time.
• Current treatments and what the new intervention displaces — and the savings from not using them.
• Realistic uptake — often the most uncertain input, so shown as scenarios.
• No discounting — good practice guidance from ISPOR (Sullivan and colleagues, 2014) recommends presenting budget impact undiscounted, as budgets are planned in annual amounts.

BIA and cost-effectiveness: better together

Cost-effectiveness answers “is it good value?”; budget impact answers “can we afford it, and when?”. A decision-maker with both can choose to adopt, adopt for a priority group, phase in, negotiate the price, or decline — and explain why.

Get started

• Try the free budget impact calculator to see how the building blocks fit together.
• Read the guide Budget impact analysis: when and how ministries use it.
• Download the blank five-year budget impact template.

If your institution is building the processes to use budget impact and cost-effectiveness evidence routinely, our HTA readiness assessment is a practical starting point.