Panel T17a P07 Session 1. Title of the panel. Going Universal? Universal Health Coverage on Paper and in Practice. Title of the paper.

Transcription

1 3 rd International Conference on Public Policy (ICPP3) June 28-30, 2017 Singapore Panel T17a P07 Session 1 Title of the panel Going Universal? Universal Health Coverage on Paper and in Practice Title of the paper Implementing Policy Under A Decentralized And Democratic Polity: Lesson Learned From Indonesian Policy Transition Towards Universal Health Coverage Author Wahyudi Kumorotomo Gadjah Mada University, Indonesia kumoro@ugm.ac.id Date of presentation June 28th,

2 Implementing Policy Under A Decentralized and Democratic Polity: Lesson Learned from Indonesian Policy Towards UHC (Universal Health Coverage) ABSTRACT This study is aimed at explaining the implementation process of a public policy using an Indonesian case, especially the health policy towards a UHC (Universal Health Coverage), an area of policy that is being planned and implemented in many developing countries. Since 2014, the Indonesian government launched a comprehensive policy for more effective social welfare system. Under a grand design of the National Social Security System, two agencies called BPJS (Badan Pelaksana Jaminan Sosial, Social Security Administering Bodies) are set up. The BPJS program on health is targeted to cover at least million Indonesian in the first year and would cover all the population in The government is trying to deal with a far-reaching healthcare reform to create a Universal Health Coverage (UHC) that has been in practice in many developed countries. In order to finance the program, the government has worked out two systems. First, individuals living below the poverty line will get financial assistance under the Premium Payment Assistance (PPA). Second, individuals who are employed and able to finance the premium are included in the non-ppa group consisting civil servants, private sector employees, entrepreneurs, military and police officers. However, it is still unclear whether the government is ready to deal with financial provision according to the initiated coverage. The financial shortage might also be expected in providing premium for wage-earners and non-salaried workers. The BPJS finance has run a deficit in the last three years at about 4 percent. Under a decentralized system, there have been issues about coordination of policy and expenditures between the central and regional governments, in the interests of both equity and also efficiency. Deteriorated quality of services in health care have forced well-paid workers to seek higherquality care elsewhere under a financial scheme of insurance providers. Keywords: democratic governance, health finance, Universal Health Coverage, policy implementation, Indonesia. 2

3 I. INTRODUCTION Having been stalled for years, the Indonesian government launched a comprehensive policy for more effective social welfare system. Under a grand design of the SJSN (Sistem Jaminan Sosial Nasional, National Social Security System), two agencies called BPJS (Badan Pelaksana Jaminan Sosial, Social Security Administering Bodies) have been set up. The first BPJS on health is initiated under the universal health- care program, known as Jaminan Kesehatan Nasional (JKN) or National Health Insurance. This BPJS on health has been operational since January 2014 by merging four state- owned companies that traditionally focusing their businesses on health insurance. The second BPJS will be launched in July 2015 to offer accident and life insurance as well as pension programs. The BPJS program on health is targeted to cover all the population by the end of In effect, the coverage target is planned from a process of a conversion and a registration procedure. The conversion includes 24.5 million individuals formerly registered under Askes and Jamsostek, the state insurance provider for public officials and formal private companies' employees, 86.4 million individuals under the community health insurance scheme (Jamkesmas), and 1.6 million individuals from the military and the police registered under the scheme of Asabri. The registration is expected to come from individuals who would see the benefit of having a health insurance under the government- administered system. It appeared that the Indonesian government is trying to deal with a far- reaching health- care reform to create a Universal Health Coverage (UHC) that has been in practice in many developed countries. The JKN covers comprehensive benefits from infectious diseases such as influenza to expensive medical treatment such as heart surgery, dialysis and cancer therapies. In order to finance the JKN, the government has worked out two systems. First, individuals living below the poverty line will get financial assistance under the PBI (Penerima Bantuan Iuran, Premium Payment Assistance). Second, individuals who are employed and able to finance the premium are included in 3

4 the non- PBI group consisting civil servants, private sector employees, entrepreneurs, military and police officers. However, it is still unclear whether the government is ready to deal with financial provision according to the initiated coverage. In 2014, while the government has increased budget allocation for Jamkesmas from Rp 8.29 trillion to Rp 19.3 trilion, the minimum premium remained at Rp 19,225 ($ 1.57) per person. The financial shortage might also be expected as the premium collected from wage- earners and non- salaried workers would not be enough to finance health services. Dr. Fahmi Idris, the director of BPJS, was quoted as saying that until December 2014, the government could only collect Rp 41 trillion from the premium while the claims liability has amounted to Rp 42.6 trillion, a mismatch of percent (Kontan, 17 Feb 2015). Nevertheless, according to the government plan, the proposal to raise the premium from Rp 19,225 to Rp 27,500 would only be materialized in In order to avoid insolvency in the JKN system, the Ministry of Health has set low reimbursement levels for hospitals. Although most of the hospitals have signed up for JKN, the low reimbursement might eventually dampen the interest of private clinics and hospitals, which lead to overcrowding in state hospitals. Another possibility is that the deteriorated quality of services in health care would force well- paid workers to seek higher- quality care elsewhere under a financial scheme of insurance providers. This study is aimed at explaining the implementation process of the Indonesian new health- care system administered by the BPJS with the focus on financial aspect. As a national policy involving millions of citizens, it is important to understand how the JKN will affect the government budget, whether the policy is financially solvent, and whether the targeted coverage is realistically sustainable. Aside from describing the national picture of the JKN policy, the study will be explaining its implementation at the regional level. The analysis is conducted based on the available online data on the national government budget, especially from the master plan of the SJSN and the JKN schemes that are published by the Indonesian Ministry of Health. In order to get the international perspectives, comparative analysis will be exercised using the experience of countries adopted or those that are in transition towards the 4

5 UHC. Policy notes, journals, and references that are available in the WHO headquarter and UNRISD were referred to conduct the analysis. Aside from the available online resources and WHO library, interviews and discussions with experts in Graduate Institute of International and Development Studies, University of Geneva, are also carried out. In Indonesia, statistics on local hospitals, clinics, diagnostic centers, and the available human resources such as doctors, nurses and paramedic officers are collected from the local Dinas Kesehatan (Local Agency of Health) and public hospitals. Interviews with the director of regional BPJS and the Jamkesda were undertaken to understand what has been happening on the ground. Some additional interviews with stake- holders and medical doctors and patients who registered into the BPJS system have also been undertaken. The master plan for implementing JKN has been laid out by the Ministry of Health in the Road- Map for National Health Insurance , a complicated and ambitious policy for a country that is targeting universal coverage for million people. Table 1 describes the main elements of JKN. Table 1. Financial Plan for Indonesian Universal Health Coverage Resource Collection Pooling Purchasing / Provision Government budget to Existing funds to be Payments to public and public facilities. pooled and managed by private health facilities. Government contribution for poor and near- poor: Rp 22,000-27,000 ($ ) per month. Self funded contributions. Laborers: 5-6% of monthly wages. Non- wage laborers / informal sector: 5-6% of monthly wages. To be covered partly by the government. Source: Road- map of JKN; Mboi,2014 BPJS. Jamkesmas Jamkesda (some) Askes Asabri Jamsostek target: Rp million covered target: Entire population, including the remaining Jamkesda scheme. Total predicted coverage in 2019: million people. Public Health Clinics and private providers: capitation. Hospitals: Diagnosis Related Groups (INA- CBG) based payments to be negotiated and varied according to region. Benefit packages: Comprehensive. Initially third- class hospital for government funded and second- class hospital for self funded. Target: second- class for all by

6 According to the plan, the transformation of five existing schemes (Jamkesmas, Askes, Asabri, Jamsostek, and parts of Jamkesda) into a single scheme under BPJS should be completed in Then, the BPJS will manage the health insurance scheme for all people who have paid the premium and all for whom it has been paid. As explained earlier, the BPJS system will cover both the premium payers as well as poor individuals whose premium is paid by the government under the Premium Payment Assistance (PBI). Monthly premium and membership fee (4.5% of salary) are made compulsory for all the workers, and the registration is to be completed in mid By 2017, all big and medium enterprises are expected to have the scheme. By 2018, the small enterprises are targeted to join. And by 2019 all Indonesian citizens and foreigners who work permanently in the country should be covered by the BPJS scheme. At the international level, studies on the transition of health financing towards universal coverage are still lacking or fragmented at best. According to Savedoff (2012), there are typically four areas of study on health financing; First, studies that address the growth in health spending and are mostly concerned with efforts to reduce costs and improve cost- effectiveness. Second, studies on the rising share of pooled funding that are usually focus on institutional issues such us the merits of public and private provision, insurance, and services. Thirds, studies on the effects of public policies like user fees and community health insurance, the impact of out- of- pocket (OOP) expenditures on people's risks of impoverishment, and generally focus on how to reduce OOP spending on health. Fourth, studies that try to disentangle causality, asking whether rising incomes are responsible for improved health or if improvements in health have driven economic growth. Under such research mapping, this study relates to the second category and seeks to provide a better picture on how to raise pooled public fund that is critical for extending health services to attain universal coverage. How should decisions are made when there is an issue of government contribution? Given the coverage that would imply a large number of individuals in diverse regional health facilities, is the national standard applicable for all the regions? What should be done if there is a problem of insolvency and financial sustainability? 6

7 These are the questions during the implementation stage that would determine the success of health policy in Indonesia. II. PATHWAYS TOWARD UNIVERSAL HEALTH COVERAGE (UHC) a. The Social Nature of Universal Coverage The main issue of health services for the poor is the burden of payments that have to be born by individuals, that is the so- called out- of- pocket payments. Around the globe, out- of- pocket payments create financial barriers that prevent millions of people from receiving needed health services. And many of those who pay for health services are confronted with financial catastrophe and impoverishment (Carrin et al, 2008). Even some people who have enough income might eventually confront financial problem when they are getting old or experiencing health problem and cannot get sufficient insurance to cover health services. Therefore, the idea of universal coverage is to protect people, at all income levels, from financial risks associated with ill health. In all countries, the question is how to create health financing systems that are able to achieve and maintain universal coverage. By definition, universal coverage certainly implies basic social security as it meant to secure access for all individuals to appropriate promotive, preventive, curative and rehabilitative services at an affordable cost. One should note, however, that the concept of universal coverage is not based on subjective judgment of the policy makers. Many politicians say that they have launched a social health protection and are committed to implement health finance for all. Yet political statements and program launching is not enough. The conceptual fault here is that universal coverage sometimes can be used to justify practically any health financing reform (Kutzin, 2013) while the objective coverage is not entirely attained. The objective of universal coverage is efficiency and equity in health resource distribution so that objectivity, transparency and accountability have to be assured. Before a country can set up a full- fledged universal coverage, it usually takes a route of gradually implementing Social Health Insurance (SHI). The WHO 7

8 recognizes SHI as a social mechanism for raising and pooling funds to finance health services, along with tax- financing, private health insurance, community insurance, and others (Carrin & James, 2004). In many European countries, working people and their employers, as well as the self- employed, pay contributions that cover a package of health services available to other people, who then become their dependents or the insurees. The governments sometimes also pay subsidies into these systems in order to ensure the financial sustainability. This is something that might be problematic in most developing countries for two reasons; First, the governments are not able to collect taxes and enough revenues to support the subsidy. Second, the contribution should be made compulsory and therefore it has to be explicitly stated in the law and the government has to enforce the provision. Therefore, it is important that the government should give attention to the issues of financial adequacy while expanding coverage can only be attained through a strong policy determination towards better health services for the whole society. One of the most formidable challenges for policy makers is how to make public contribution compulsory for certain elements of the society so that a large pool of funding would be enough for universal coverage. It should be noted that no country has attained universal coverage by relying on voluntary contributions. There are many possible schemes for health insurance that are offered by commercial companies, state- owned enterprises, non- government organizations, or community raised funding, but at the end the government should regulate that the contribution for universal coverage is compulsory. Once the government makes it compulsory for all the citizens to register and to contribute to a nationally- pooled insurance, a necessary condition for universality is attained. Some middle- income countries may opt to explore voluntary prepayment mechanisms as an alternative to out- of- pocket payments, but experts say that this would rarely become a long- term solution toward a universal coverage (Kutzin, 2012). For that reason, it is important that the government understand the ultimate goal of universal health coverage as parts of social program that needs long- term vision of national development. Although the idea of risk pooling is appealing for policy makers in many 8

9 countries, however, there fact is rather disappointing. The World Health Organization reported in 2010 that more than half of the world population is lacking any type of social and healthcare protection. In many cases, lack of health care services is caused by low level of income in developing countries. Individual and household health care programs cannot be sufficiently financed as the governments cannot get enough revenues from taxes and service charges. Surprisingly, universal coverage is also an issue in developed countries. The United States of America, for example, is an economic giant and spends more than 17.9 percent of its GDP (among the highest proportion in the world), yet 15.4 percent of its population remains uncovered by health insurance (US Census Bureau, 2012; World Bank, 2014). The ineffective free- market mechanism to provide health services for the poor is the main reason for many countries to embrace universal coverage. Therefore, it is encouraging that the USA and China, the two major economic powers that previously relied on private insurance for health care, are currently moving back to universal coverage policy. Low- income and middle- income countries are recently making steps towards developing health systems that would cover all of its population, a policy that has been adopted in most European countries since World War II. The BRIC (Brazil, Russia, India, China) are among the most populated countries implementing policies toward universal coverage. Countries in Africa, such as Ghana, Moldova and Rwanda are adopting the new health systems to cover all the citizens. In Asia, similar policies have been implemented in Kyrgystan, Malaysia, Thailand and Indonesia. In Europe, universal coverage emerged from a belief in solidarity, a fear of revolution, and a changing view of the role of the state. Substantial benefits accruing from universal health care have been acknowledged from the experience of European countries, especially Germany, France, England, Netherlands and Switzerland, which have implemented the policy since the end of World War II. However, even when the policy has been in practice for decades, the universal benefits cannot be taken for granted. Recently, due to economic slow down in some parts of Europe, universal health care is under a threat (McKee, 2013). Even in well developed European countries, radical austerity 9

10 policies posed a threat for universal health coverage, particularly in countries where the governments perceived serious moral hazards in their social security programs. That is why strong national leadership and long- term commitment are essential to achieve and sustain universal coverage policy. Experience from middle- income countries tells how national leadership in can be critical in the overall goal achievement. For example, the national government in Turkey clearly stated that it is illegal for a hospital to retain patients who are unable to pay for a healthcare service (Atun et al, 2013). Such a measure was taken under a comprehensive health plan started in Although Turkey is still in progress towards an appropriate scale of equitable coverage, its clear policy on access and affordability would help a long the way. Tabel 2. Health Finance and Workforce in Selected Asian Countries Country Per Capita GDP (US$) Health Expenditure to GDP (%) N Doctors Density per 10,000 Nurses and Midwives N Density per 10,000 Indonesia 3, , , Cambodia 1, , , Viet Nam 1, , , India 1, , ,146, Malaysia 10, , , Source: WHO, 2013; World Bank, Table 1 shows the main health finance and workforce indicators in relatively comparable size of population and stage of economic development in Asia. Although Indonesia has relatively better economic indicators in terms of per capita GDP, its expenditure for health to GDP is among the lowest at only 3.0 percent and the density of doctors is a meagre at 2.9 per 10,000 of population. On the contrary, while its economic indicators do not particularly high, Viet Nam spends 6.6 percent of its GDP on health and the density of doctors is the highest at 12.2 per 10,000 of population. The government commitment on health among countries is something that merit to study in the future as it is related to contextual factors such as 10

11 political history, education, and culture. The similar notion also applies when one should analyze the transition towards universal coverage for health services. b. Indonesian MoH Road Map The Ministry of Health has set up an action plan for BPJS Kesehatan consisting six task forces that are responsible for the following implementation areas: a. Health facilities, referral system and infrastructures; In total, the country provides 2,302 hospitals with 264,303 beds. There are 40 medical doctors, 11 dentists, 75 midwives and 158 nurses for every 100,000 population. b. Finance, transformation of programs and institutions; Setting premiums and tariffs are among the crucial task for the BPJS. The transformation of existing insurance and health schemes (Jamkesmas, Askes, Jamsostek) into a universal health insurance is in progress. c. Regulatory supports for implementation; Government Regulation No.101/2012 on the beneficiaries of government subsidy and Presidential Decree No.12/2013 on social health insurance have been operational. However there are more technical regulations, MoH decrees, and procedures for health insurance scheme to be formulated and implemented. d. Human resource and capacity building; It is to develop human resource mapping, distribution, and assignment. As the universal health insurance requires new approach in managing hospitals, doctors, nurses and other human resources, new mind- set is to be disseminated among them. e. Pharmaceutical and medical devices; The tasks include developing e- catalogue for national medical system, setting formularies for drugs and medical devices, and establishing a Health Technology Assessment that is responsible for supervising pharmaceutical industries. f. Socialization and advocacy; 11

12 This task- force is responsible for preparing materials, strategies, and media for national campaigns or socialization. It remains to be seen whether the 2019 target of creating a single healthcare system is realistic enough to be completed. In accordance to the MoH Decree No.69/2013, the BPJS adopts the latest version of Indonesia Case Based Groups (INA- CBG) tariff as its pattern for processing and paying medical claims. The INA- CBG is a diagnostic reimbursement system that replaced the previous fee- for- service reimbursement system. After being launched on January 2014, the BPJS has collected Rp 5.4 trillion ($ million) in premiums and paid out Rp 1.04 trillion in claims to hospitals. Most of high- rank officials in the MoH believe that BPJS will be financially strong in the long run. However, many hospital managements and doctors do not share those beliefs. Increased numbers of BPJS members seeking hospital services under the JKN program have led public hospitals struggling with expenses. Indicative observations also noted that many poor patients have been rejected by public hospitals. The patients have been desperately seek appropriate beds for medical treatments in the Community Health Service and Type C hospitals as the management declares that all beds are fully occupied. The hospital managements worry that they would face financial insolvency if they accept all the poor patient applications (Tijan, 2014). The financial consequence of universal health insurance for the national budget is something that has not been made public, including the plan of president Joko Widodo who keen on making Kartu Sehat (Health Cards) in line with the BPJS system. Already in April 2014, Minister of Health Nafsiah Mboi stated the need to revise healthcare tariff for JKN by arguing that the health facilities and medical workers paid less than what procedures cost (National News, Jakarta, 01/04/2014). The contribution rate will ultimately have to be increased if the benefit is higher, or else the benefits will ultimately have to be reduced in order to keep the cost the same (World Bank, 2012). Again, this indicates that continuous assessment on the INA- CBG tariffs is one of the prerequisite to ensure BPJS financial viability, a big task for Mrs. Nila Moelok, the newly appointed Minister of Health. 12

13 As a single entity allowed to collect medical funds for all Indonesian citizens, the BPJS will have an enormous power to ensure that all the services provider (hospitals, clinics, doctors, diagnostic centers) to follow the standards for quality, efficiency, timeliness and service effectiveness. This will in effect abolish fee- for- service system that is proven to be costly. However, the JKN system is still unclear about how to make the BPJS held accountable to the public. A supervisory body at the national level is yet to be established. Another uncertainty is how the government will impose sanctions on employers and employees who fail to participate in the BPJS programs. The BPJS registration is currently conducted on voluntary basis and ultimately there are risks that the universal health coverage cannot be completed according to the plan. III. CONNECTING FINANCE WITH GOALS: THE BPJS PERFORMANCE a. Coverage In order to assess the effectiveness of Indonesian health finance policy to cover health services for the population, it is important to consider how has been the performance of the BPJS in integrating various health schemes in the country. As a health scheme specifically targeted for the poor and near- poor, the Jamkesnas is now managed by the BPJS. Jamkesnas program was started in 2005 as Askeskin, literary means health insurance for the poor. In 2007, the Askeskin that was originally based on households was renamed Jamkesmas to be based on individuals and expanded to also cover the near- poor. With the official estimates indicate that there are 76.4 million poor and near- poor beneficiaries of the million total population in 2014, the BPJS is managing formerly Jamkesmas to cover almost one third of the population. With the funding of about a quarter of the central government budget on health, the BPJS handling on Jamkesmas target is likely determine the Indonesian government intention to attain a universal coverage. It is therefore important to analyze the whole institutional arrangement for health policy in Indonesia as administrative efficiency is also a key factor determining the quality and the coverage of health services in the country. 13

14 Indonesia spent 3.0 percent of its GDP on health with the total health expenditure per capita of US$ in The public spending accounted for 41.1 percent of the total health expenditure and almost half of the public spending was at the district level. As described earlier, this level of spending is relatively low among countries with comparable levels of income. And, due to decentralization policy started in 2001, the effectiveness of health spending might even lower as it depends on how the district governments spend their budget on health. Under Indonesia's decentralized system, provincial and district governments are responsible for health service delivery and that is why they account for nearly half of the government spending on health. Since 2014, the BPJS is aimed at integrating Jamkesmas, Jamsostek, Askes, and Jamkesda (which actually means insurance schemes managed by provincial and district governments). However, it turned out that most of Jamkesda schemes are currently managed by the provincial and district governments. There have been resistance from some of the provincial governors and district heads to fully integrate to the BPJS systems on the grounds that most beneficiaries at the local levels are in favor of the Jamkesda and they have been registered by the Jamkesda. As a compromise, the BPJS is applying the so- called "bridging" program for registration and for reimbursement of health services provided by public as well as private hospitals. Therefore, in many provinces and districts the Jamkesmas is complemented and even substituted by the Jamkesda Based on the SHA (System of Health Accounts) for Indonesia (Soewondo et al, 2011), it is also indicated that 51.6% financial resources for healthcare provision is carried out by public and private hospitals. Nevertheless, the institutional picture is actually more complicated. At the community level, healthcare services are undertaken by voluntary workers in the Poskesdes (Village Health Posts) and Posyandu (Integrated Service Posts). Voluntary midwives and nurses work at the Poskesdes to provides curative services. During a monthly gatherings, voluntary workers run the Posyandus that are assisted by a doctor and nurses from the Puskesmas (Sub- district Health Clinics) and the Pustu (smaller scale Puskesmas). In 77,465 villages throughout the country, there are 53,152 Poskesdes' and 268,439 Posyandus. 14

15 Puskesmas and Pustu at the sub- district level are managed by a medical doctor and assisted by nurses and midwives to carry out basic health services. Six basic services for the Puskesmas and Pustu include: 1) health promotion, 2) environmental health, 3) maternal and child health services (including family planning), 4) community nutrition program, 5) prevention and eradication of communicable diseases, and 6) basic medical treatments. The number of Puskesmas and Pustu has increased from 7,699 in 2005 to 9,321 in 2011, which means an average growth of 3.5 percent per annum (Suryahadi et al, 2014). Due to geographical and financial diversity across the districts, however, there is diversity in Puskesmas and Pustu services. In some urbanized districts, Puskesmas may have inpatient facilities and more comprehensive medical treatments. But in remote districts of Maluku or Papua islands, the Puskesmas may not have a professional medical doctor while medicines and treatments are severely lacking. The total number of hospital in Indonesia has increased from 1,145 in 2000 to 2,302 in The inpatient facilities are also improved as the total bed number increased from 107,537 to 264,303 in the same period. Nevertheless, as also indicated earlier, the bed to population ratio in Indonesia is still among the lowest among East Asian and Pacific countries. The Ministry of Health categorizes general hospitals into classes: Class A with more than 400 beds, certain number of specialized medical doctors, and advanced equipment; Class B with beds, some specialized doctors and standard equipment; Class C with beds, general medical doctors and basic equipment; and Class D with beds with mostly general medical doctors. As explained, Class A and B hospitals tend to be available in more urban areas while Class C and Class D hospitals and Puskesmas are those mostly available in rural and remote areas. There are also three classes of Special Hospitals with health services focusing on medical specialties (obstetric and gynecology, ophthalmology, oncology, dentistry, internist, surgery, urology, cardiology, psychiatry, neurology, etc). As a middle- income country with GDP per capita of US$ 3,475 in 2014 and enjoyed good economic growth rates in the last few decades, Indonesia has made impressive health gains. Life expectancy at birth has increased from 45 years in 1960 to almost 70 years in Infant mortality rate has dropped from 128 per 15

16 1,000 live births to 27 per 1,000 live births in the same period. However, poverty and poor health services continue to be a fundamental issue in the country. About 18 percent of its population continues to live below US$ 1 a day. Malnutrition rates are particularly high as reflected in the fact that 35.6 percent of Indonesian children under 5 are stunted. The government envisioned that issues on poverty and health services could be addressed by Jamkesmas program. Figure 2. Out- of- Pocket (OOP) Shares of Total Health Expenditure (%) OOP shares Insurance Coverage Source : WHO, SUSENAS. Figure 3. Insurance Coverage Among Three Population Groups 120% 100% 100% 80% 64% 60% 48% Population 40% Insurance Coverage 20% 16% 15% 20% 20% 13% 0% Formal sector The poor Informal sector Total Source: Adapted from Thangcharoensathien, 2011; MoH,

17 The access and the quality of health care facilities remain a problem in Indonesian remote districts. Starting from 2010s, the health insurance coverage has surpassed the percentage of out- of- pocket spending. Yet even after the establishment of BPJS and further implementation of Jamkesmas, the out- of- pocket spending in the country in 2015 is predicted to remains high at 42.5 percent (Figure 2), far above the WHO recommended rates of 15 to 20 percent. One should note that the WHO recommended rates of percent are based on the assumption that only at those levels is risk of impoverishment due to catastrophic health spending generally found to be low (WHO, 2010). Although the BPJS program may help Indonesia to catch up international standard of coverage, the challenge is formidable given its sheer size of population and its diverse targets. Figure 3 shows that while the formal sector workers have been mostly covered by insurance schemes and the poor may be covered under the PBI scheme, only 13% of informal sector workers are covered by health insurance. These are the people belong to the precarious group who can be impoverished once a family member is severely sick and the family have to bear the out- of- pocket burden of health services. The existence of prepayment system does not guarantee financial protection. The international experience has proven this caveat. For example, in India, 15% of individuals enrolled in the Self- Employed Women Association are faced financially catastrophic level of payment even after reimbursement for hospital admission; in China, Chinese Rural Cooperative Medical System covers only 30% of inpatient expenditure, yet there is relatively a rare case of financial catastrophes (Thangcharoensathien et al, 2011). Therefore, the Indonesian authorities should really be careful in assessing the Jamkesnas scheme, particularly in evaluating whether the scheme is effective in reducing out- of- pocket spending among the poor and near- poor. BPJS scheme on healthcare system is designed to cover both the premium payers as well as poor individuals whose premium is paid by the government under the Premium Payment Assistance (PBI). All the standards for services, eligibility for members, and premium rates, are set by the Ministry of Health. To expand healthcare coverage, the BPJS is responsible for registering health 17

18 beneficiaries, administering membership, supervising health- care providers, and managing claims and complaints. For registering beneficiaries, BPJS and MoH refers to national statistics that is compiled by the BPS (Badan Pusat Statistik, National Bureu of Statistics). The providers - - public and private hospitals, health clinics, and community health centers - - would then claim fees and medical services provided by the Ministry of Health via the BPJS offices. For the formal sector workers, the monthly premium and membership fee (4.5% of salary) are made compulsory, and the registration is to be completed in mid For the informal workers, the nearly- poor and the poor, the minimum monthly premium under the PBI scheme has been adjusted from Rp 5,000 (0.6 US$) in 2007 to Rp 19,225 (1.57 US$) in According to MoH Decree No.69/2013, the BPJS must adopt the latest version of Indonesia Case Based Groups (INA- CBG) tariff as its pattern for processing and paying medical claims. The INA- CBG is a diagnostic reimbursement system that replaced the previous fee- for- service reimbursement system. Based on the estimate that the government finance is targeted to cover 86.4 million with the PBI premium of Rp 19,225 per person per month, the central government's contribution to BPJS would equal to Rp 19.9 trillion. Since the government budget in 2014 was only Rp 44.9 trillion, it implies that almost half of the overall government health budget would be used to finance the BPJS. Then, the consequence is straightforward: the share for financing other areas of spending such as salaries and operating costs for centrally- financed hospitals, investments in improving supply and much- needed preventive and promotive interventions would have to be shrunk. The 2015 budget is allocating Rp 47.8 trillion. With this incremental increase in the government budget, there would only two possibilities: pending the reimbursement of BPJS claims, or reducing other expenditure components in health. Without additional funds to cover the elderly, orphanage children, street children, homeless people and informal sector workers, the envisaged universal coverage is still a long way to go. 18

19 b. Composition of Risk Pools In theory, the fundamental principle of universal coverage affirms that contributions are not risk- based but are instead based on ability- to- pay. This principle reflects a desire for equal access to healthcare and a certain degree of equity in contribution setting. However, the principle implies a problem of the so- called adverse selection, where high risks chase low risks out of the insurance market. Adverse selection is a particular tendency when the health scheme registration is voluntary and the same benefit package is offered to all those in the pool (Carrin & James, 2004). The phenomena of adverse selection can be explained as a moral hazard in health service. A certain degree of prepayment combined with risk pooling may result in some individuals being entitled to more health care than they have paid for. This suggests that individuals may have an excess demand for health care or aspire for "free" health care as they are confronted with a subsidized price of health care. Some may argue that moral hazard would not happen in health as one should expect people to prefer being healthy to demanding care. However, the reality is that as one get sick, he or she may want to obtain as much care as possible. Moreover, when there are no financial barriers to demand health care at various levels of the health care system, people may want to bypass the lower echelons and demand care from more specialized and expensive facilities. The reality of adverse selection and moral hazard in health care seem occurred when the BPJS started registration and pay for claims from the general hospitals in the country. Insofar, the MoH rules that while registration is voluntary, a similar benefit package of health care is offered to those who have registered. After nation- wide voluntary registration was started in January 2014, many people who perceived themselves as having a serious illness rushed to register in the BPJS offices. Some of the new members are in fact relatively healthy, but some others had been indicated with acute diseases that needed urgent medical treatments. Therefore, during the first months of implementation, the BPJS has to pay a large amount of claims from the catastrophic disease in many general hospitals. 19

20 Table 3. Costs of Catastrophic Medical Treatments in General Hospitals (%) Components General Hospital Class A (N=6) General Hospital Class B (N=2) Special Hospital (N=3) CD C S CD C S CD C S Accommodation Ward treatment Laboratory Radiology Surgery Non- surgery Medical rehab Other treatment Medicine Medical consumables Total Average Costs (Million Rp) Note: CD: Cardiac Disease C : Cancer S : Stroke Source: Budiarto, 2012; MoH, Table 4. Comparison Between Actuarial Costs and Claims from INA- CBG (Rp) Hospital Actuarial Costs Claims (INA- CBG) CD C S CD C S General 83,590,111 90,018,978 69,295,894 93,227,404 71,828,561 16,212,746 (Class A) General (Class B) 4,079,878 6,867,048 3,271,237 6,936,283 4,495,967 2,977,179 Special 8,190,252 13,692,311 3,657,221 16,647,900 11,999,754 3,217,077 Average 45, ,554,004 36,255,390 52,127,993 57,818,963 8,240,261 Source: Budiarto, 2012; MoH, Table 3 shows the proportion of costs for medical treatment for catastrophic diseases (cardiac disease with open surgery, cancer, and stroke) in selected general hospitals. It turns out that the major costs in all hospitals are for medicine ( %) and inpatient accommodation ( %). The pattern of costs for medicine, accommodation, and ward treatment has similarities among the three hospital categories. However, surgeries and medical rehabilitation are only carried out in higher class hospitals, either Class A or Class B. For non- surgery treatment, higher class hospitals tend to charge more 20

21 while for other treatment there is no pattern, but the tendency is that special hospitals would charge more. An exception for higher cost in Class B for stroke inpatients is because these patients tend to stay longer in the hospital for ward treatment, physiotherapy, and other health services. The data evidently shows that higher class hospitals would charge more (Table 4). The expense for cardiac inpatient treatment in Class A hospitals is twenty times higher than that in Class B and ten times higher than that in Special Hospital. For cancer inpatients, the expense for medical treatment in Class A hospital is also much higher in comparison to that in Class B hospital and Special Hospital. For stroke inpatients, between Class B hospitals and Special Hospital the expense is about the same, but it would be twenty times higher if they go to Class A hospitals. Therefore, to ensure financial sustainability with pooled funding it is important that the so- called "clinical pathways" or medical referential system among different hospital classes have to be applied consistently. Within a pooled funding of general insurance system, a patient with relatively less severe illness who can be treated in the Puskesmas or Class C hospital should not be allowed to go to Class A hospital for similar treatment because it would create an excess demand for health care, which would incur unnecessary costs. The comparison in Table 4 also suggests that, with an exception for cancer treatment, the average amount of health care claims under the INA- CBG index are higher than the actuarial. Overall, the nominal gap of between actuarial costs and claims is Rp 2,925,540. This notion is important because most of those who have registered to the BPJS believed that the nominal claims from INA- CBG scheme are lower than what they should pay to the hospitals. From a macro perspective, this confirms that there has been adverse selection during the early stages of BPJS registration. Cardiac failures, cancer and stroke are categorized as catastrophic diseases that imply high costs in the hospitals. And if the costs cannot be recovered by the pooled fund and the government subsidy that are being administered by the BPJS, the whole system would financially fail. Therefore, there are strategic principles that has to be considered by the decision makers: 1) the sustainability of finance and services, 2) people's ability- to- pay for insurance, 3) equity and fairness in health services, 21

22 and 4) fair competition among hospital managements. Many aspects have to be taken account to attain expand insurance coverage, and the clinical pathway is just one of them. IV. DECENTRALIZED HEALTH SERVICES: THE JAMKESDA a. Local Budget and Health Financing It is envisaged in the Road- Map for National Health Insurance that all the financial resources managed by different agencies should be integrated into a single system under the BPJS. However, in the Indonesian decentralized political context, it is a tough challenge for the Ministry of Health to integrate health, let alone the newly established BPJS. The fundamental fragmentation is between the ex- Jamkesmas schemes that are presently managed by the BPJS and the Jamkesda schemes managed by provincial and district governments. Of the total 34 provinces in the country, only Papua and West Papua that do not have Jamkesda schemes. Jamkesda funds currently cover an estimated 31.6 million people in almost all provinces and 352 districts/cities. Law No.36/2009 national health policy stipulates that 10 percent of the government budget must be allocated on health. However, most of the provincial and local governments have not reach this percentage as the average is only 9.56 percent. At the provincial level, the lowest allocation is Riau at 6.57 percent and the highest is Bali at 12.7 percent. As explained earlier, the Indonesian government financial commitment on health is relatively weak in comparison to other countries in the region. After the political transition into a relatively more democratic government in late 1990s, there was so much hope that decentralization would bring the local government closer to the people's need. It was an illusive hope as most decision makers at the sub- national government do not give appropriate attention on health, education, social security, and all elements of public services that have been badly needed by the local people. Many of the politicians have in fact spend local budgets more on public official salaries, building monuments, sport stadiums, and more grandiose projects for their own political populism. 22

23 As most of the sub- national governments allocate too little for financing health programs, the per capita budget for health is also very low from the international standard. Among the provinces, the national average of health budget per capita is only Rp 286,665 (US$ 22.05) per person/year in One should note that different levels of political commitment among the governors, fiscal capacity and total population in the provinces are among the critical factors influencing their budget priority on health. The provincial government of Riau is among the highest in terms of fiscal capacity, yet they only allocate 6 percent of the budget on health. On the contrary, Aceh provincial government is among the lowest on fiscal capacity, but they allocate 10 percent of the budget on health. While the BPJS encounter difficulties in integrating the local Jamkesda into a universal scheme, there is also a large variety on how Jamkesda perform in the provinces and districts. As described in Table 6, the percentage of Jamkesda member to the total population is highly diverse from 1.89 percent (East Java) to percent (South Sumatra). It is somewhat ironical that East Java province, one of the most populated provinces with more than 37.4 million people, only registered the least percentage of its people to Jamkesda scheme. It appears that there is a legal vacuum on how the sub- national governments should formulate policies on health. The central government has to acknowledge and support decentralization policy as it is written in the constitution. However, there should be some policy instruments to ensure that the sub- national governments really undertake health care programs more seriously since it is fundamental for the whole nation. Table 6. Jamkesda Membership No. Province Population Jamkesda Member % Population 1 Aceh 4,842,238 2,226, North Sumatra 12,982,204 1,208, West Sumatra 4,846,909 1,141, Riau 5,538,367 1,341, Jambi 3,092, , South Sumatra 7,450,394 4,868, Bengkulu 1,715,518 73, Lampung 7,608,405 4,513, Bangka Belitung 1,223, , Riau Islands 1,679, , Jakarta Capital 9,607,787 4,300, Region 23

24 12 West Java 43,053,732 5,082, Central Java 32,382,657 2,926, Jogja 3,457,491 1,007, East Java 37,476, , Banten 10,632, , Bali 3,890,757 2,440, West 4,500, , Nusatenggara 19 East Nusatenggara 4,683, , West Kalimantan 4,395, , Central 2,212, , Kalimantan 22 South Kalimantan 3,626,616 1,077, East Kalimantan 3,553,143 1,868, North Sulawesi 2,270, , Central Sulawesi 2,635, , South Sulawesi 8,034,776 4,892, South- East 2,232,586 89, Sulawesi 28 Gorontalo 1,040, , West Sulawesi 1,158,651 48, Maluku 1,533, , North Maluku 1,038, , West Papua 760,422 n.a. n.a. 33 Papua 2,833,381 n.a. n.a. 34 North Kalimantan n.a. n.a. National 237,989,154 46,632,278 19,59 Note : North Kalimantan is newly established province in 2012, data on Jamkesda is unavailable Source : MoH, In order to assess the performance of Jamkesda, whether or not the scheme would result in equitable health services that cover all of Indonesian citizens, there are at least three aspects of health care management to be evaluated, namely: membership or registration, financial management, and benefit package distribution. Again, decision makers in Indonesia should learn from experience of other countries that universal coverage cannot be materialized within a short time. It needs strong political commitment, perseverance, and appropriate adjustment during the implementation. First, the membership to the JKN system depends on how the sub- national governments accept the poor families or individuals who come to the Jamkesda or BPJS regional offices. Some local government authorities admit and include all the citizens who had not registered in any of the public insurance system. The only difference is that those who come with enough money would 24