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Old problems, fresh solutions: Indonesia’s new health regime1. IntroductionThe Asian financial crisis caused tremendous pain for many countries, but few experienced as muchupheaval as Indonesia. Not only did the economy suffer, shrinking by almost 14% in 1998 andthrowing millions of Indonesians into poverty, but the government itself collapsed. After the continuityof 32 years of rule under President Suharto and his New Order regime, the people rose up and demandedchange.In the decade that followed, Indonesia moved to fix its financial system, reform its companies andnurse the economy back to health. In addition, the political environment was transformed. From beingrun by an authoritarian regime, Indonesia pushed towards greater democracy, and in 2004 the peoplevoted for the first time directly to elect their president and vice president. Just as significant, thegovernment put in place a process of decentralisation, devolving decision-making and spending poweraway from the centre and into the hands of the provinces and local government.While most observers believe the transitions of the past decade have put the country on a sounderfooting for the future, many aspects of life in Indonesia have yet to see the benefits. Among them isIndonesia’s healthcare environment. The rule of President Suharto frequently comes in for criticism, butstandards of healthcare did improve during his tenure. Health services were rolled out to much of thecountry, helping to lift average life expectancy from 40 in 1960 to 67 in 1998.Over the past decade, however, those improvements have stalled and progress in key health measureshas stagnated. In particular, Indonesia continues to perform poorly with maternal mortality. The numberof maternal deaths is today roughly twice the level of other countries in Asia with comparable incomelevels (see chart 1). The country also underperforms relative to regional peers on measures of infantChart 1Maternal mortality rate (per 100,000 live births) and per capita GDP in emerging AsiaMaternal mortality 0VietnamThailand100Sri Lanka002,0004,000MalaysiaChina6,0008,000Per capita GDP US (PPP)Source: WHO and EIU (data for latest year available)6 Economist Intelligence Unit 201010,00012,00014,00016,000

Old problems, fresh solutions: Indonesia’s new health regimemortality and child mortality (see charts 2 and 3). And the picture is little better for the incidence of manydiseases such as tuberculosis.Chart 2Under-5 mortality rate (per 1,000 live births) and per capita GDPUnder-5 mortality angladeshIndonesia40Philippines200ChinaThailandSri 00014,00016,000Per capita GDP US (PPP)Source: WHO and EIU (data for latest year available)Chart 3Infant mortality rate (deaths between birth and one year per 1,000 live births) and per capita GDPInfant mortality andSri 0016,000Per capita GDP US (PPP)Source: WHO and EIU (data for latest year available)More recently, however, as Indonesia’s political and economic transitions have bedded in, a newoptimism has emerged that health in the country is on the brink of major improvement. The governmenthas announced substantial increases to its health budget in coming years and is in the process of rollingout health insurance to large swathes of people who presently lack coverage. As such, the outlook forstandards of health in Indonesia looks promising.But making progress will not be easy. For one, the country is vast, with 240m people, most of whomremain poor—average per capita income in 2009 was just US 2,249 (US 4,010 measured by purchasing Economist Intelligence Unit 2010 7

Old problems, fresh solutions: Indonesia’s new health regimepower parity). That means that basic health infrastructure such as good sanitation and clean water isoften missing, let alone more sophisticated health services such as clinics and hospitals. In such anenvironment, the health issues of a low-to-middle income country are still prevalent, from maternalmortality to vector-borne diseases such as malaria to malnutrition and stunting (the World HealthOrganisation reports that as recently as 2008, 37% of children under five years old in Indonesia sufferedstunted growth).At the same time, Indonesia is also experiencing a surge in degenerative diseases associated with apopulation that is both ageing and living an increasingly sedentary lifestyle. Conditions such as diabetes,obesity, heart disease, cancer and other illnesses more often associated with developed countries arerising sharply. Cardiovascular disease is already the biggest killer in Indonesia, accounting for a quarterof all deaths in the country in 2004 according to the World Heart Federation. The result is a double burdenof issues—those of poverty and those of development—each placing competing demands on the country’shealth services.Equally important are issues of inequality in access to healthcare. While the country is urbanising, halfof all Indonesians still live in rural areas. Those outside the cities are less wealthy, have poorer healthand have limited access to medical care. Indonesia’s island geography makes reaching these poor doublyhard.All of which raises big questions. Given the government’s plans to increase its health spending,how can it best tackle these challenges? What policies have worked well in other countries in similarsituations? And what new ideas might be worth considering?8 Economist Intelligence Unit 2010

Old problems, fresh solutions: Indonesia’s new health regime2. Inequality: A country dividedOf all Indonesia’s health challenges, perhaps the greatest is unequal access to medical care. Atpresent, those who live in urban areas have much better health than those who live in ruralcommunities. The divide is equally strong between the people of Java and Bali, and those who live inremoter regions. The population of Java and Bali, which is almost 60% of Indonesia’s total, tends tobe wealthier and more urban than other parts of the country.For evidence of inequality, consider the incidence of tuberculosis. According to Indonesia’s Ministry ofHealth, Java and Bali experience 59 cases for every 100,000 people. Outside those islands, the incidenceis 174 cases per 100,000, and in the country’s eastern provinces such as Papua it runs to 189.Maternal care shows a similar bias. Most births in Indonesia happen at home, but not all of them areoverseen by a trained birth attendant. In 2007, 86% of births in urban areas were attended by a doctoror midwife, whereas only 57% of rural births had medical personnel present.1 Unsurprisingly, rates ofmaternal mortality and infant mortality are far higher in rural areas.Child mortality further illustrates the divideChart 4(see chart 4). A report from the World Bank in 2008 Deaths for infants aged 0 to 1 year, and for children aged 1 yearto 5 yearscalculated that fewer than one in 40 children dieInfant mortalityChild mortalityDeaths per 1,000 live birthsbefore the age of five in Bali and Yogyakarta inUrban31Java. By comparison, in the more remote northern7Ruralprovince of Gorontalo on the island of Sulawesi,4516close to one in 10 children die before their fifthSource: Indonesia Demographic and Health Survey 2007birthday.2Indonesia’s Doctors, Midwivesand Nurses: Current Stock,Increasing Needs, FutureChallenges and Options, WorldBank, 20091Investing in Indonesia’sHealth: Challenges and Opportunities for Future PublicSpending, World Bank, 20082Low wealth poor healthHealth inequalities arise in Indonesia for many reasons. Chief among them is the fact that those who livein rural and remote locations are poor. The rise in commodity prices in recent years—especially risingprices for palm oil—has lifted rural earnings, but rural incomes remain much lower than those of citydwellers. This brings about poorer health outcomes in many ways.For a start, rural inhabitants have less money to pay for healthcare. All else being equal, that alonewould result in lower health standards. However, because they spend less on health, rural areas attractfewer health providers. This is certainly the case in Indonesia. Government statistics show that in 2006the rural population had one doctor for every 16,792 people. In cities, the ratio was one doctor for every2,763 inhabitants. Over time, these ratios have improved, but not because doctors are moving to thecountryside, rather it is because people are migrating to the cities.3Government salaries in Indonesia are low, and so the state has long allowed its employees to engagein “dual practice”, where they work in government facilities for some of the time, and top up their salariesthrough private practice on the side. For doctors, dual practice is an important part of their income, butData from PODES, or PotensiDesa, regular governmentsurveys of village potential3 Economist Intelligence Unit 2010 9

Old problems, fresh solutions: Indonesia’s new health regime“Missing in Action: Teacherand Health Worker Absencein Developing Countries”,Journal of EconomicPerspectives, Vol 20, No 1,2006410the opportunities for it are much reduced in poorer rural communities and so they prefer not to work there.Limpakarnjanarat Khanchit, head of the World Health Organisation’s programme in Indonesia,sympathises with the country’s uneven distribution of doctors. “This is an issue every country suffersfrom, even developed ones like America,” he notes. “Doctors want a good quality of life, they want goodschools for their children and they want to earn a good salary. That all tends to favour cities rather thanremote areas.”The rural/urban divide is made worse by Indonesia’s unique geography. With nearly 18,000 islands, ofwhich 6,000 are inhabited, the population is highly dispersed and hard to reach. Physical infrastructure,such as roads, is often missing, which makes it hard to connect thinly spread populations to centralhealth facilities, and complicates the supply of medicines and health equipment. Geography also hits theprovision of clean water and proper sanitation, which compounds rural health challenges.Furthermore, rural communities tend to have lower levels of education, which again makes it harderto manage health. The education of girls is especially important. Countless studies have proven thateducating girls leads to smaller families with better health and higher incomes.During the rule of President Suharto, strong efforts were made to address health inequalities.Following the oil boom of the 1970s, Indonesia used some of the proceeds to roll out a programme ofprimary care across the country. It set up around 8,000 puskesmas, or local health centres, supportedby a further 23,000 posyandu, or community health posts (usually staffed by volunteers). Doctors wererequired by the government to work in rural and remote puskesmas as part of their graduation and as aprecondition for taking on masters degrees to become medical specialists. The government also trainedthousands of midwives, installing one in almost every community under the bidan di desa (villagemidwife) scheme. Indeed, midwives remain well distributed across the country to this day, although thequality of care they offer is highly variable.Following the decentralisation of government during the past 12 years, however, many of thesecentrally administered schemes have struggled to keep going. District health authorities—those thatoperate at the local level, below provincial and central authorities—are still developing the skills neededto manage health budgets and to implement health policies. Many puskesmas lack basic infrastructuresuch as electricity and operate without a doctor, relying on nurses to fulfil diagnostic and treatmentservices for which they are not qualified. And where doctors are appointed, absenteeism is high. A studyin 2006 published in the Journal of Economic Perspectives found that 40% of health workers were absentfrom their posts during working hours.4The need for changeImproving health services for those who live in rural and remote places is crucial, says Firman Lubis, amedical professor at the University of Indonesia. “Access to good healthcare is a fundamental humanright,” he says. What’s more, he adds, “Those in rural communities tend to come from lower socioeconomic backgrounds, which makes them more vulnerable to catastrophic healthcare costs when diseaseor disaster strikes.”While the number of people in Indonesia who fall into technical definitions of poverty—such as having Economist Intelligence Unit 2010

Old problems, fresh solutions: Indonesia’s new health regimea daily income of less than US 1 a day—rose during the financial crisis of 1998, it has been falling steadilyever since. Nonetheless, rising wealth has barely reduced their exposure to the dangers of unexpectedhealth expenditure. The World Bank estimates that half of all Indonesians live at an income level thatis vulnerable to poverty.5 These people are often uneducated about how to manage their health, andexperience extreme suffering when unanticipated medical costs tip them back below the poverty line.Like many other countries, Indonesia is a signatory to the United Nations’ Millennium DevelopmentGoals (MDGs), which set out 21 targets such as reducing extreme poverty, raising school enrolment ratesand promoting gender equality—all to be achieved by 2015. In April this year Indonesia’s president,Susilo Bambang Yudhoyono, appointed a special envoy, Nila Moeloek, to oversee his country’s progress onits MDG commitments.“We’re well on our way to meeting most of our MDGs, but we do have some challenging ones,” saysProfessor Moeloek. “On education we’ve done very well, on reducing poverty we’ve made strong headway,but our health goals are a struggle. The three big concerns are maternal mortality, the spread of HIV/AIDSand access to clean water.” Only marginally better are MDGs concerning rates of child mortality and childmalnutrition.With 55% of Indonesians still living in rural areas, the nation needs to tackle the inequality in itshealthcare system and raise standards of care in rural locations to match those received in urbanenvironments. If it doesn’t, then some MDGs will almost certainly be missed.Investing in Indonesia’sHealth: Challenges and Opportunities for Future PublicSpending, World Bank, 20085 Economist Intelligence Unit 2010 11

Old problems, fresh solutions: Indonesia’s new health regime3. Innovations in healthcare financingWChart 5Per capita health spending in US (blue bars, LHS) and per capita GDP in US (red dots, RHS)12 Economist Intelligence Unit 2010iaaysMalailandThaChiniLankaPer capita GDP US , right osLadiaCambogladeshBanSource: WHO and EIU (all using PPP; latest year available)mPer capita health spending US , left axis8007006005004003002001000Vi6Health Financing in Indonesia: A Reform Road Map, WorldBank, 2009hile inequality appears entrenched in Indonesia, the outlook for the next few years offers scopefor optimism that healthcare in Indonesia is on the brink of a major step forward. The chief goalof the government with regard to health is to move towards a programme of “universal coverage”. Thisinvolves both putting in place a set of services that make healthcare available to everyone, and alsosetting up the means to finance such services. In both aspects of universal coverage—services andfinancing—Indonesia has historically struggled. Today, however, new steps are being taken to addressthe deficiencies.Financing for universal coverage can be achieved in many different ways, ranging from systemsthat are completely covered by government tax revenues, to those that are funded through privatecontributions by workers into government schemes, to systems based around citizens buying coverfrom private health insurers. The important thing is to put in place structures that gather pre-paidcontributions for healthcare in some sort of risk-pooling structure. The aim is to avoid people making outof-pocket (OOP) payments at the moment when they need medical attention. In low-income countries,OOP payments can cripple a family unprotected by health insurance, and often lead them to avoid seekingmedical treatment until the last minute.In Indonesia, health insurance coverage has traditionally been low, while OOP payments have beenhigh, especially among the poor. In the absence of widespread insurance, health spending as a wholehas been among the lowest in the region. Vietnam, India and Cambodia, for example, all have lower percapita incomes than Indonesia, yet spend more per person on healthcare services (see chart 5). And ofthe money that is spent on health in Indonesia, only around half comes from the government, with therest paid directly by the people themselves. In 2006, the government accounted for 50% of Indonesia’shealth spending, a further 33% was made up of OOP payments by citizens, and the rest came via healthinsurance schemes, foreign aid and other 0000

Old problems, fresh solutions: Indonesia’s new health regimeRaising healthcare spendingHowever, a new health law passed in late 2009 commits the government to lifting its health spendingsubstantially. The law is still being implemented, but it mandates that 5% of the central government’sbudget and 10% of all provincial and district government spending be directed to healthcare. The move isnot before time. When comparing government spending on health relative to GDP, Indonesia is among thelowest in Asia (see chart 6).At the Ministry of Health, Tjandra YogaChart 6Government spending on health as a percentage of GDP, 2006Aditama, director-general of disease control(% of GDP)Myanmarand environmental health, says spending in the0past was low because the government had otherLaos0.86priorities, such as creating jobs and revitalisingPakistanthe economy. “Now there is more room to focus on0.93Bangladeshother things,” he explains. “Education and health1.26are both receiving a lot more money.”India1.28Much of that spending increase will go towardsIndonesiasupporting a new health insurance scheme called1.46PhilippinesJamkesmas. Set up in 2008, it is an expansion1.73of an existing scheme called Askeskin that wasCambodia1.94introduced in 2004. Askeskin was targeted atSri LankaIndonesia’s poorest citizens, but has grown under2.23Chinathe new Jamkesmas format to include many of the2.32country’s near-poor, taking in 76m people, or oneMalaysia2.33third of the population.ThailandOther insurance schemes also exist, such as3.15VietnamAskes, a health insurance scheme for civil servants,3.19Asabri, one for the military, and Jamsostek—Source: WHO and EIUmandatory health insurance for employees at firmswith 10 or more staff. Nonetheless, the total number of people covered by all the schemes is still lessthan 50% of Indonesians, meaning that OOP payments continue to be unacceptably high. Many of thecountry’s workers are employed by small companies with fewer than 10 staff, or else work in the informalsector, and so are exempt from existing insurance cover.In the coming years, the government intends to keep expanding Jamkesmas until it covers the entirepopulation. The goal is widely applauded, but important questions remain, including how best to roll outthe programme. For example, which segments of the population should be next in line to join the schemeand when? Just as important are questions over what package of benefits the scheme should include,what role the private sector will play in providing services under the sch

Professor Nila Moeloek, special envoy to president of Indonesia for Millennium Development Goals Claudia Rokx, lead health specialist for Indonesia, World Bank . from maternal mortality to vector-borne diseases such as malaria to malnutrition. At the same time,