LEGISLATIVE FISCAL ESTIMATE
SENATE, No. 3837
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: SEPTEMBER 5, 2025
SUMMARY
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Synopsis: |
Requires NJ FamilyCare to reimburse inpatient providers for long-acting injectable antipsychotic drugs at outpatient reimbursement rate. |
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Type of Impact: |
Annual State expenditure and revenue increases and decreases. |
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Agencies Affected: |
Department of Human Services. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
Annual |
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State Expenditure Impact |
Indeterminate |
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State Revenue Impact |
Indeterminate |
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· The Office of Legislative Services (OLS) concludes that this bill would result in an indeterminate impact on annual State expenditures and revenues.
· Under the bill, annual State NJ FamilyCare expenditures would increase as a result of carving out, and increasing, the reimbursement of long-acting injectable antipsychotic drugs from the Diagnostic Related Group reimbursement system. However, the OLS assumes that these costs would be offset to some extent by countervailing impacts such as alterations to the reimbursement system, newly gained access to federal drug rebates for long-acting antipsychotic drugs administered in an inpatient setting, and service cost decreases due to reduced hospitalizations and improved health care outcomes.
· Any increases or decreases in NJ FamilyCare costs would concomitantly change annual State revenue in the form of federal reimbursements associated with eligible program expenditures.
BILL DESCRIPTION
This bill requires that NJ FamilyCare reimbursement for long-acting injectable antipsychotic drugs administered in an inpatient setting be separate and distinct from any reimbursement issued to an inpatient provider based on a Diagnostic Related Group reimbursement system. Additionally, under the bill, the inpatient reimbursement rate of these drugs is mandated to be equal to the identical drug’s NJ FamilyCare reimbursement rate when administered in an outpatient setting.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that this bill would result in an indeterminate impact on annual State expenditures and revenues. Under the bill, annual State NJ FamilyCare expenditures would increase as a result of carving out, and increasing, the reimbursement of long-acting injectable antipsychotic drugs from the Diagnostic Related Group reimbursement system. However, the OLS assumes that these costs would be offset to some extent by countervailing impacts under the bill. Any increases or decreases in NJ FamilyCare costs would concomitantly change annual State revenue in the form of federal reimbursements associated with eligible program expenditures.
Currently, expenses incurred by most inpatient facilities in the provision of long-acting injectable antipsychotic drugs to NJ FamilyCare enrollees are considered reimbursed under the Diagnosis Related Group reimbursement system. This system is designed to calculate a reimbursement rate for inpatient care that covers all necessary services and drugs within the assigned group, without itemizing individual service or drug costs. While the determination of a final reimbursement rate under this system considers several factors, such as the patient’s diagnosis, length of stay, and discharge status, as well as certain other cost outliers, all reimbursement rates under the system are based on a Statewide base rate, which pursuant to the New Jersey Administrative Code is $4,479.
Long-acting injectable antipsychotic drugs are typically used in the treatment of schizophrenia and bipolar disorder. For reference, when the diagnosis weights for schizophrenia and bipolar disorder are applied, the Statewide base rate adjusts to between approximately $3,000 and $19,000, depending on the severity of the diagnosis.
Under this bill, an applicable inpatient facility would receive a separate payment from the Diagnostic Related Group reimbursement rate for the administration of long-acting injectable antipsychotic drugs, which rate would be equal to the existing outpatient rate for that drug. Analysis of the current outpatient fee-for-service reimbursement rates of several long-acting injectable antipsychotic drugs under the NJ FamilyCare, as well as dosage recommendations for those drugs, concludes that reimbursement under this bill for these drugs could be up to $5,000 per injection, depending on the drug administered. Current utilization of long-acting injectable antipsychotic drugs in an inpatient setting by NJ FamilyCare enrollees is unknown.
The OLS projects that the higher reimbursement rates under the bill would likely increase utilization of long-acting injectable antipsychotic drugs in the inpatient setting, and decrease the use of the less expensive daily oral antipsychotics, which would still be reimbursed under the Diagnostic Related Group reimbursement system. Moreover, the bill may also increase the utilization of long-acting injectable antipsychotic drugs in the outpatient setting, as NJ FamilyCare enrollees who were initially administered the drug in an inpatient setting follow up with outpatient providers for subsequent doses of the drug.
The OLS notes that the bill may also apply upward pressure to rates at those inpatient facilities that are not reimbursed under the Diagnostic Related Group reimbursement system, but who administer long-acting injectable antipsychotic drugs to NJ FamilyCare enrollees. For example, psychiatric hospitals are reimbursed via a per diem rate under NJ FamilyCare, rather than the Diagnostic Related Group reimbursement system. Current reimbursement rates for psychiatric hospitals range from approximately $400 to $2,000 per day.
There are several countervailing, albeit indeterminate, impacts that would to some extent offset the cost of increased drug reimbursements under the bill. First, the department may alter the Diagnostic Related Group reimbursement system to account for the carve-out of high-cost long-acting injectable antipsychotic drugs, thereby providing some cost savings under the bill. Additionally, under the bill, long-acting injectable antipsychotic drugs provided in an inpatient setting would newly qualify for federal Medicaid drug manufacturers’ rebates, which rebates are typically not available when drugs are reimbursed under the Diagnostic Related Group reimbursement system. Finally, the long-term effects of this bill may lead to indeterminate savings if service costs, such as hospital readmissions, decline due to increased utilization of long-acting injectable antipsychotic drugs. Some studies have shown that long-acting injectable antipsychotics, compared to oral antipsychotics, reduce relapse, hospitalization, and treatment discontinuation in patients.
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Section: |
Human Services |
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Analyst: |
Principal Research Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).