E. Role of Budget Impact Analysis
Budget-impact analysis determines the impact of implementing or adopting a particular technology or program on a designated budget. The designated budget is generally the responsibility of a particular health care program or authority, e.g., a drug plan or formulary, a hospital, an employer-sponsored health plan, or a regional or national health authority (Mauskopf 2007). It does not necessarily account for the broader economic impact (e.g., societal impact) of implementing or adopting the technology. BIAs can take different forms. For example, a BIA can be conducted simply to determine how much a technology would increase or decrease a particular budget. Or, it could be conducted to determine whether, or to what extent, one or more technologies could be implemented within a fixed (or “capped”) budget. BIAs have appeared with increasing frequency during the past decade, along with greater attention to improvement and standardization of their methods, transparency, and reporting, including with respect to the uses of BIA given decision makers’ various economic perspectives (Orlewska 2009).
A BIA might incorporate a CEA to determine the most cost-effective combination of technologies that can be implemented subject to a budget constraint. However, a CEA is not a substitute for a BIA; indeed, a CEA may yield an inappropriate finding for making budgetary decisions. For example, a CEA of alternative population screening tests might indicate that technology A is the most cost-effective (e.g., in dollars per case of cancer detected). However, allocating resources efficiently (e.g., maximizing cost-effectiveness) may not be consistent with affordability, i.e., remaining within a fixed budget. As such, a fixed budget amount may be too small to implement technology A for the full designated population, forcing the use of an alternative (less cost-effective) technology, no technology, or a policy to limit the use of technology A to fewer people in order to remain within the fixed budget. Box V-11 presents a hypothetical example of a BIA in which a budget constraint is contrary to selecting the most cost-effective alternative. The need for a health program (such as a drug formulary) to operate within a particular budget constraint may be contrary to selecting a technology that is cost-effective or even cost-saving for the broader health care system. This is a form of the “silo budgeting” problem, in that each budget is managed independently of other budgets and of the overall health system. The inability to transfer funds across these silos can undermine system-wide efficiency.
Box V-11. Cost Effectiveness of New Intervention ‘A’ in the Context of a Fixed Budget:A Hypothetical Budget Impact Analysis
| Patient subgroupage (years) | Δ Cost per life-year gained (£/life-yr) | Net cost of intervention ‘A’ over existing treatment (£/patient) | Number of patients per year | Potentialbudget impact(£/yr) |
|---|---|---|---|---|
| <45 | 200,000 | 500 | 250 | 125,000 |
| 45-60 | 75,000 | 500 | 1,000 | 500,000 |
| 61-75 | 25,000 | 500 | 1,750 | 875,000 |
| <75 | 15,000 | 500 | 2,000 | 1,000,000 |
How should a fixed annual budget of £500,000 be allocated?It would be most cost-effective to provide Intervention ‘A’ to patients age >75 years. However, there is insufficient budget to provide the intervention to all patients in that subgroup. Although there is sufficient budget to provide the intervention to all patients age 45-60 years, this is not the most cost-effective approach.
Source: With kind permission from Springer Science+Business Media: Pharmacoeconomics, Developing guidance for budget impact analysis, 19(6), 2001, 609-21, Trueman P, Drummond M, Hutton J, Figure 1, and any original (first) copyright notice displayed with material.