Question:

What is the difference between a cost-effectiveness analysis and a budget impact model?

Answer:

A budget impact model (BIM) is similar to a cost-effectiveness analysis, except it does not explicitly model effectiveness. Instead, a BIM only considers the direct cost of care incurred by competing strategies. Moreover, unlike a cost-effectiveness analysis, a BIM considers not only the cost of competing strategies, but also accounts for the underlying population of eligible patients. So, a very expensive therapy might not be "cost-effective," but might end up having a small budget impact.

For example, a very expensive drug might perform poorly in a cost-effectiveness analysis, but might have a reasonable budget impact, only because very few people are eligible to receive the drug in the first place. A BIM would demonstrate that such a drug generates a small overall per-member per-month (PMPM) cost when distributed over the entire population of members in a health care plan, even though it is not "cost-effective" by usual standards. This paradox is not difficult to explain when the finer points of cost-effectiveness analysis and BIM are understood.

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