OBJECTIVE: To estimate the budget impact of using the Kangaroo Method in a municipal health care network. METHODS: An analytical decision model was developed to simulate the costs of the Kangaroo Method and Neonatal Intermediate Care Unit in Rio de Janeiro, RJ, in 2011. The reference population was clinically stable newborns, who may receive either of the two types of care. The budget impact for a hypothetical cohort of 1,000 eligible newborns was estimated for one year. The proportion of eligible infants receiving the two type of care was obtained through data collection in hospitals included in the study. The probabilities of events and resource consumption of health care in the period were incorporated into the model. A scenario analysis was developed to reflect the adoption of the Kangaroo Method on a greater or smaller scale. RESULTS: The use of the second and third stage of Kangaroo Method means a cost reduction of R$ 1,085,379.64 (16.0%) in a year if all eligible infants were assisted in Kangaroo Method. CONCLUSIONS: The Kangaroo Method options costs less than the Neonatal Intermediate Care Unit. The analysis of the budget impact of this method on the public health care system showed significant savings in the year long period analyzed.