Health Financing in Indonesia (Directions in Development)
The timing of this change was no co-incidence. Suharto had for many years maintained the balance of power by distributing lucrative monopolies and other business opportunities between the military which in turn guarantees the stability of his regime and capital-rich private corporations whose investment and job-creation skills contributed to economic growth. In the early s, however, his own family became more predatory, sucking up opportunities that would otherwise have gone to the stabilising forces. This happened just as ordinary Indonesians, many now lifted out of poverty, began to demand more opportunities and services.
The re-formulated social security funds generated revenue for the government, acting as giant slush funds that were used for political purposes, including buying off potential opponents to Suharto's increasingly shaky regime Schwarz They were also used to fund the most basic services. The for-state-profit structure and the precedent of using funds for patronage purposes created strongly entrenched interests that shaped the future development of social security in Indonesia.
In , an economic meltdown spread rapidly from Thailand across Southeast Asia. The Indonesian rupiah lost three quarters of its value in just six months. Prices rocketed, consumer goods and even food became scarce or unaffordable. When the government announced a hike in fuel prices, other citizens joined them. For the first time in over three decades, the language of citizens' rights rang out in Indonesia's public spaces. In May , Suharto stepped down. He was succeeded by his technocratic Vice-President, who moved quickly to call elections, as well as to try to mitigate the worst effects of the crisis, supporting education, nutrition and health services for the hardest hit.
It was hoped that this would quell unrest, while restoring the legitimacy of the ruling Golkar party. Using a loan from the Asian Development Bank, the government began to issue health cards which allowed poor families to seek free primary health services. Within a year, close to five million Indonesians could access services with these cards Asian Development Bank Though some misdistribution of health cards was reported, the pro-poor policies were largely successful in ensuring that the most vulnerable could access at least outpatient services.
The social protection policies did not, however, protect the ruling party. Suharto's downfall and the subsequent elections led to the euphoric embrace of the concept of citizens' rights on the part of Indonesians who had heard about nothing other than their responsibilities for more than three decades. In , in the first truly democratic elections in nearly 45 years, Indonesians favoured the PDI-P party led by Megawati Sukarnoputri, which had campaigned on a platform of increased equity.
Two years later, a further constitutional amendment specified that the state was responsible for ensuring health service provision, as well as for developing a social security system for all citizens. The next clause, reminiscent of the declaration of independence, stated that the details would be worked out later. An unwieldy working group of over 60 people drafted a social security law that, in its first version, envisaged the fusion of all four state-owned insurance firms into a single entity, which would operate as a single payer, not-for-profit trust fund.
Minutes of meetings and interview accounts show that this was hotly contested, not least by the existing insurance firms and those who benefited from the profits they generated. Besides being reluctant to lose their cash cows, directors of state firms were reportedly concerned that the restructuring would open their books to public scrutiny. Employers were afraid that the plan would raise costs, partly because they could no longer opt out of the state-run scheme. They argued that the mandatory schemes violated human rights. Private sector employees and some labour unions also opposed the draft bill, because under the new structure, workers' would have to contribute to premiums formerly covered entirely by employers.
What's more, they worried that premiums paid by workers and employers would be used to subsidise services for the poor and unwaged, leading to a cut in benefits for those in work. Advisors favouring private sector interests, including from the United States, objected to the fact that the state would have a virtual monopoly on provision of social insurance Wisnu ; Thabrany ; Marzoeki et al. The bill was reportedly revised 56 times before a draft was submitted to parliament in January Press reviews reveal very little public attention to the social security law over those years of consultation, contestation and negotiation.
It was only after the draft bill was submitted to parliament that it came to wide public attention; that led to yet more contestation, not least from newly-empowered districts who felt the bill was an attempt to re-centralise power. Supporters of rival models organised demonstrations in front of the national parliament and elsewhere, prompting considerable news coverage. Interviews as well as a comparison of proposed drafts show that this new wave of discordant debate led to a further gutting of the bill.
Lobbying of parliamentarians and back-room deal-making continued to be important mechanisms, but numerous press statements backing one or other position indicate that public grand-standing was important in this phase also. In the final iteration, all four state insurers were mentioned as participants in the eventual social security system, a triumph for the status quo.
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Many of the more contentious issues were simply side-stepped. The law, which contained virtually no details of contribution levels, co-payment percentages, benefits packages or sanctions, stipulated that these should be established by follow-up legislation.
Indonesia's road to universal health coverage: a political journey
It listed the need for 11 presidential instructions, 10 government regulations and one national law. The latter, which was to detail the structure and administrative procedures of the still only vaguely-delineated social security system, had to be passed within five years Republic of Indonesia, Ministry of Health Though Megawati had taken over as President when her predecessor was impeached in with social security reform very high on her list of priorities, it had taken another three years of wrangling before all the interest groups involved agreed on a final bill.
She signed it into law in an unprecedented high-profile ceremony on her very last day in office. Megawati's support for a national social security system was not enough to secure her re-election by an electorate disappointed by her generally sluggish leadership; rather, it was to become her legacy.
A member of the bill drafting committee, wrote about the ceremony: While working groups in Jakarta thrashed out constitutional amendments and social security laws, the rest of Indonesia had undergone a quiet political revolution. In order to relieve pressure that had been building against decades of centralised rule that seemed to suck resources from other islands for the benefit of overcrowded Java, Indonesia decentralised.
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From , responsibility for most of the functions of state devolved to the district level, which was expected to allocate funds according to local needs from unrestricted block grants provided by the centre. This gave local governments unprecedented leeway for policy experimentation. The devolution came at exactly the time that external funding for emergency health service provision for poor families dried up. Democratically elected politicians quickly found that they were not easily able to withdraw services that people had come to rely on. The pioneering district of Purbalingga in Central Java in assumed the challenge of providing health services for poor people by providing capitation funds to primary health service providers and the district hospital.
The central government sought to encourage this type of experimentation by providing top-up funding derived partly from savings on reduced fuel subsidies to selected district governments under a programme called JPK Gakin. The involved districts responded differently; some aimed for universal coverage, with well-off citizens paying premiums and the government picking up the tab for the poor, while others sought only to provide services for the poor. Services were paid for on a capitation basis in some areas, through fee for service in others.
In rural areas, governments sometimes paid participants' transport costs to encourage service use. Probably the most celebrated of the local schemes was in the Balinese district of Jembrana, one of the island's poorest areas. Himself a dentist who had worked in local health departments, he had firm ideas about how health services should be provided, and determined to put them into practice. From , Jembrana district paid for outpatient services for all residents and hospitalisation for the poor at any registered provider, public or private.
This was funded in part by cuts in civil service positions. Though ultimately unsustainable financially, evaluators agree that it greatly increased the quality as well as the quantity of health services for residents; infant mortality dropped by nearly half in the first year of the programme Jakarta Post A well-funded district health scheme suddenly became the must-have political programme for aspiring local politicians.
These local successes did not go unnoticed by Jakarta. Just a few days after being appointed Minister of Health in October , Siti Fadilah Supari declared that the government would pay for inpatient services for all poor people in Indonesia. Insiders report that the controversial cardiologist, representing a minority party whose support the new president sought, seemed unaware of the newly-minted social security law when she made this promise.
She showed no sign that she was aware that in the current decentralised set-up, the central government had no power to instruct districts who to care for, or how. The programme, rebranded ASKESKIN, provided capitation payments to primary health centres and fee-for-service reimbursements to hospitals for inpatient care. This move struck at the very core of the power relationships that were newly emerging since decentralisation began.
Districts which had been running their own health schemes successfully were angered by what they saw as a reverse take-over by the central government; they felt that they would lose the very flexibility that allowed them to meet local needs, and in some cases would see services reduced to a nationally standardised package Arifianto et al.
Political opportunists may also have been disappointed that the selection of beneficiaries and administration of pooled insurance funds was being taken out of their hands. Certainly, some local politicians resented seeing a programme that was considered an important electoral asset in district polls hijacked by the national government.
The East Java province and Rembang district governments went so far as to challenge the social security law in the Constitutional Court, saying that it violated districts' constitutional right to choose their own service providers. Though the Constitutional Court upheld the law, they also ruled that district governments could run local health schemes to supplement the national scheme, expanding coverage or benefits, for example Mahakam Konstitutsi, Republik Indonesia Registration was chaotic, and people complained that participants selected on the basis of data held at the national level were often not the poorest.
Poor administration delayed reimbursements, leading hospitals to turn away patients enrolled in the scheme. The health minister's cell phone overflowed with text messages from dissatisfied customers. Instead of reaping the political benefits of expanded insurance, the central government was being demonised Thabrany Jakarta began once again actively to encourage local governments to provide health insurance schemes for the poor and near-poor not reached by the national programme.
In Aceh province, for example, every citizen was entitled to free in-patient care; the local scheme even covered treatment overseas in some cases. At the national level, progress in implementing the social security law was sluggish. Controversial from the start, and seen as very much an initiative of Megawati and the PDI-P party, the law was not prioritised by her successor as president, Susilo Bambang Yudhoyono.
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Though he did issue a decree in appointing members to the national social security council DSJN envisaged by the law, advisors to politicians involved in the process told us in interviews that the powerful position of chair was contested, operational funds were short and little progress was made. As the deadline for the passage of a further implementing law approached and it seemed as though Indonesia's social security ambitions might never be implemented, parliamentarians and civil society groups both became more active.
Meanwhile, influential academics, research organisations and think tanks began to scrutinise existing social insurance efforts and make their findings public. By this time, UHC was already something of a buzzword among international development organisations; several of them including AusAID, USAID and GIZ provided funding for these studies, though no interviewees reported that the views of foreign development agencies significantly influenced the shape or outcome of domestic discussions.
After the deadline for the passage of a new law passed, KAJS filed a lawsuit against the president and several ministers, accusing them of breaching the constitution and the social security law by failing to implement mandated reforms Wisnu The court sided with the activists, ruling in June that the government must act immediately to pass necessary legislation to implement the law.
Discussions about the bill became more heated, according to those who participated and the minutes of the meetings. Though dozens of studies had examined actuarial needs, the burden of disease, the fiscal implications of financing models and other technical aspects of policy options, these were barely considered in the negotiation process; this was a source of considerable frustration to some of our interviewees. Instead, the focus was on institutional arrangements Aspinall Existing insurers and the politicians and bureaucrats who benefited from the funds they controlled continued to lobby against the mandated reforms, arguing that they would disrupt a system that was currently working well.
The employers argued against mandatory participation, while labour groups objected to the contributory nature of the scheme, which they said transformed social security from a right into an obligation. The former health minister Siti Fadilah Supari weighed in, saying mandatory health insurance would be unfair to the poor, who couldn't pay the premium. All these groups wanted to maintain the status quo, restricting changes to new participants, and they expressed their opinions not just in parliamentary discussions but also in the press and public fora Abimanyu ; Damanik ; Gresnews ; Sijabat Parliamentarians, on the other hand, newly responsive to an electorate ever more aware of its rights, pushed for a more radical bill that maintained the non-profit principles of the law and that laid out in detail the rights and obligations of all parties Abimanyu Instead of the single social security body favoured by parliament, it created two.
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Assets, liabilities, participants and staff of the corporations were automatically transferred to the new bodies. BPJS Health would from the time of its initiation in January take on participants from the existing health insurance schemes for workers, the military and the nationally-determined poor. The premiums for the latter group would continue to be paid by the state. Details continued to be worked out; in the first 18 months of its operation, 29 presidential, ministerial or government regulations were issued governing the details of the fund's operation BPJS database.
An analysis of the current functioning of the scheme is beyond the scope of this paper, but many challenges clearly remain.
Health Financing in Indonesia : A Reform Road Map
They include the need to develop an affordable and appropriate benefits package, expand service provision and encourage the regular payment of premiums by the non-poor, around half of whom do not currently contribute as the law requires. The move was widely seen as a bid to channel funds into financial institutions with links to MUI Jakarta Globe Meanwhile, politicians at all levels of government — beginning with President Joko Widodo who came to power after BPJS was in operation — are now trying to claim credit for the expansion of health coverage 8 Asril ; Sari ; Tarigan While much attention has been paid to the technical challenges of achieving universal health coverage in low and middle income countries, those challenges cannot be divorced from the particular social, political and institutional circumstances of each country that faces them.
The vast and diverse nation of Indonesia established the legal underpinnings for providing health services to its people as early as , but it was not until over half a century later that the goal was transformed from Quixotic aspiration to real possibility. In China, technocrats partnered with academics to develop an evidence base which could be used to drive health reform when a political opportunity arose Sun et al. The pathway towards affordable health care for all Indonesians has been more haphazard than is suggested by the experience of these other countries.
Progress has been marked by political opportunism, experimentation, compromise and sheer coincidence. The health insurance and wider social security system has developed iteratively to meet the political priorities of the day. In the s and s, civil servants and the military were key to national stability, and were provided for.
As manufacturing became economically important in the s, health insurance for workers rose up the agenda. Insurance bodies were restructured to provide slush funds for an embattled leadership in the early s. The need to stave off social unrest following the financial and political meltdown at the end of that decade led to the first provision of health cover for the poor, at first using a social protection model. During the long years of military rule, when decisions were dictated from the top and enforced by armies of soldiers and bureaucrats, citizens had virtually no influence on policy pathways.
After Suharto stepped down and truly democratic elections were introduced, however, the relationship between citizen and state changed and a new form of path dependency emerged. For the first time in over four decades, actions taken by the state could affect voter behaviour in ways that might affect future policy choices.
Indonesia's road to universal health coverage: a political journey
Indonesians enthusiastically adopted the rhetoric of human rights and welfare; in an atmosphere coloured by the notion that it was time for former elites to pay their debts to society, they began to demand that the state guarantee both. When the state provided free basic healthcare for the poorest Indonesians in the crisis years of the late s, it set a precedent that was hard to step back from, even though uptake of those early services was not high.
Once Indonesians saw that the state could assure affordable health, the path was set: It is notable that the national parliament, regularly cited in opinion polls as among the most corrupt institutions in Indonesia, responded to pressure from civil society, pushing through social security reforms that undermined the entrenched interests of the bureaucracy Ronoduwu In terms of experimentalist governance, the Indonesian case provides an interesting perspective. Descriptions of experimentalist governance in Europe speak of a process in which technocrats propose policy options which are implemented flexibly in different political situations, then collectively evaluated to develop shared lessons Sabel and Zeitlin In Indonesia, the limited technical input that did exist at the design stage, was largely commissioned to justify or validate local initiatives.
Controlling their own health budgets and provided with virtually no guidance by the central government, these innovative district heads tried out various models to increase access to health care. Several of these schemes were substantially implemented just as direct elections for district head were introduced: Successful models drew the attention of the press, and political candidates around the country began promising similar programmes in their election campaigns. In setting up local and indeed national schemes, winning candidates sometimes drew on advice from researchers in academic institutions to help them implement their promises.
But because the earliest experiments in health coverage were largely unforeseen, there was little central guidance of the experimentation, and no pre-planned systems through which learning was to be captured and exchanged. The use of technical analysis has remained rather limited even as local models were adapted and expanded for use at the national level. The Indonesian case, similar to that described by Agyepong and Adjei in Ghana, suggests that political priorities trump technical considerations in the ongoing implementation of health financing models as well as in their design Agyepong and Adjei Though participants in local health schemes are supposed to be integrated into the national scheme by the end of , local governments are still responsible for service provision.
However other politicians may be content to deflect discontent with health services on to the national BPJS brand that will be foremost in consumers' minds. In these cases, local accountability may be reduced and progress towards better service delivery may falter. Central involvement also has positive effects, however. Many financial, technical and political hurdles still stand between Indonesia and its goal of affordable health care for all. The rapid expansion of insurance coverage has created demand which cannot be met by the current health system Bredenkamp et al.
Service quality is already extremely poor in many areas and citizens are increasingly expressing their discontent with services that they were until recently not even able to contemplate using. A nationally standardised contribution system and putative benefits package effectively creates inequity, because service availability is so very unequal, and there will certainly be more push-back from local governments against excessive centralisation of decision-making.
Besides the service provision, cost containment will be a major challenge, and with so many funds concentrated in one pot, corruption scandals are likely. As Indonesia consolidates its democracy, the demands that citizens make of their service providers and their capacity to press effectively for improvement are both likely to increase. The habit of passing imprecisely-worded laws that allow for iterative policy making and on-the-job learning has served the country well so far, eventually resulting in solid and probably irreversible political backing for universal health coverage.
However to meet the many challenges inherent in actually delivering affordable health care to all Indonesians by , the country needs to strengthen its capacity for rigorous evaluation and policy learning at national and local levels, and draw more deeply on technical evidence to guide implementation of its ambitious plans. Indonesia's journey towards universal health coverage has been determined largely by domestic political concerns — different groups obtained access to healthcare as their socio-political importance grew.
To stave off social unrest, the government provided health coverage for the poor for the first time, creating path dependency that influenced later policy choices. The Indonesian experience underlines the value of policy experimentation, and of a close understanding of the specific contextual and political factors that drive successful UHC models at the local level. While technical considerations took a back seat to political priorities in developing the structures for health coverage nationally, they will have to be addressed going forward to achieve sustainable health coverage for all Indonesians.
The authors would like to thank all those who were interviewed and contributed their views to this paper. Thanks to Agung Nugroho and other Migunani staff for their assistance in data collection. The most recently reported figure is for They differ from official figures; in , the Indonesian statistics bureau BPS changed the way poverty was measured. She argued that Jamkesmas should pay for an operation to reverse a botched breast implant, because she was a ward of the state.
Though she ultimately did not prevail, high profile stories like this undermined public confidence in the programme. In his presidential campaign, he promised to extend this programme nationwide by issuing "Healthy Indonesia Cards". National Center for Biotechnology Information , U. Published online Sep 6. Accepted Aug If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services. Health Financing in Indonesia: A Reform Road Map. Indonesia is at a critical stage in the development and modernization of its health system. The government of Indonesia has made major improvements over the past four decades, but struggles to maintain and continue to improve important health outcomes for the poor and achieve the Millennium Development Goals. Nevertheless, some key health indicators show significant progress.
Infant and child under five mortality rates have fallen by half since the early s, although the speed of the decline appears to have slowed since Maternal mortality rates show a declining trend, but remain among the highest in East Asia.
Health Financing in Indonesia : A Reform Road Map
Indonesia's population program is one of the worlds most successful: Previously declining malnutrition rates among young children have, however, stagnated. The slowing down of progress may be explained by a poorly functioning health system as well as by new and ongoing challenges posed by demographic, epidemiological, and nutrition transitions, which require new policy directions, a reconfigured and better performing health system, and long-term sustainable financing.
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