October 28, 2016 POLICY BRIEF INDONESIA HEALTH FINANCING SYSTEM ASSESSMENT SPEND MORE, RIGHT & BETTER HEALTH FINANCING SYSTEM ASSESSMENT spend more . spend right . spend better KEY MESSAGES In the past two decades, Indonesia has experienced reductions in the nationwide poverty rate have been robust economic growth, coupled with a number accompanied by growing income inequality. The of improvements in both key health indicators and challenges of ensuring improved access to quality progress towards UHC. By the end of 2016, nearly care with the implementation of the national social 2 172 million individuals, or more than 60 percent of health insurance (JKN program) and increased of the population, were covered by Jaminan Kesehatan government supply side financing. Moreover, these Nasional (JKN) program, one of the largest single- are compounded by high levels of informality in the payer social health insurance (SHI) schemes in labor market, and a highly decentralized system of the world. Nation-wide targets aim to reach the governance with diffuse accountability mechanisms, remaining uncovered population and to have universal including delivery of essential health services. These coverage by 2019. At the same time Indonesians, challenges are projected to continue into the future broadly-speaking, have become healthier in recent and present barriers to ensuring all Indonesians are generations as progress continues along a number afforded and equitable coverage. of key health indicators. In particular, a number of improvements to child health have been realized Well-targeted and adequately financed health including declines in the under-five mortality rate from financing reforms have the potential to improve 222 per 1,000 live births in 1960 to 27 per 1,000 in 2015 health outcomes, mitigate household vulnerability which meant Indonesia achieved MDG 3. and reduce the risk of impoverishment from catastrophic health spending. However, meeting Despite improvements in health outcomes, these objectives while accelerating progress towards Indonesia is still facing a number of persistent UHC by 2019 requires significant efforts to improve economic and health challenges which require the efficiency, effectiveness and sustainability of significant and immediate changes to the way the existing health system. This will require the the health system is currently financed in order to Government of Indonesia to Spend More, Spend Right reach nationwide universal health coverage (UHC). and Spend Better: Indonesia still faces an unfinished Millennium Development Goals (MDG) agenda lagging 1. Spend More: At just 3.6 percent of GDP, overall achievement in reducing high maternal mortality health spending in Indonesia continues to be rates and childhood stunting, while faced with one of the lowest, not only in the region, but new challenges including a rising prevalence of globally. This is due primarily to low overall non-communicable diseases and growing aging government spending and a relatively low population. From an economic perspective, relative share of government spending going to health. POLICY BRIEF Currently, public spending on health is only 1.5 alternative strategies for socializing information percent of GDP. In order to achieve the ambitious about JKN target of extending coverage to all Indonesians, • Incentivize local governments to eliminate the government needs to increase public health mistargeting particularly among the poor and spending to ensure adequacy of public financing near-poor for health. 2. Spend Right: At the same time, increased Spend Right resources should be focused towards those • Strengthen primary care delivery, most interventions which are (proven) effective such importantly, provision of preventive and as increased investments in primary health promotive public health interventions care, promotive and preventive interventions, • Strengthen quality of health facilities and human particularly for vulnerable populations living in resources for health, through accreditation and rural and remote locations. certification 3. Spend Better: Moreover, investments can be • Reduce OOP payments by expanding coverage maximized by focusing on a results-based and reducing mistargeting of contribution approach that maximizes the technical efficiency assistance recipients (PBI) of the limited resources available. • Integrate supply-side and demand-side financing to improve public and private provider supply-side readiness including i) making Accelerating progress towards UHC and meeting capitation payment to puskesmas contingent nationwide population targets by 2019 will require on Minimum Service Standard (MSS) attainment Indonesia to Spend More, Spend Right and Spend ii) provide puskesmas with an appropriate Better on the existing health system. Moving forward level of autonomy balanced with capacity several opportunities exist for improving the overall enhancements iii) inclusion of private providers 3 efficiency, effectiveness and sustainability of health iv) at the hospital level, making diagnosis- financing systems. The objective of the Indonesia related group payments conditional on the public expenditure review using health financing adequacy of services provided system assessment (HFSA) framework identify critical constraints and opportunities facing Indonesia’s Spend Better health financing system and to offer evidence-based • Improve JKN capitation payment mechanism policy recommendations including: by linking it with provider’s performance to incentivize the delivery of preventive and Spend More promotive services • Raise additional public financing for health by i) • Enhance the effectiveness of intergovernmental increasing overall government revenues through fiscal transfers by improving local government improved tax collection and introduction of capacity, particularly on public sector higher ‘sin’ taxes including those on tobacco management (PSM) functions. ii) encourage labor formality iii) reprioritize • Ensuring greater accountability of local health in the government’s budget iv) increase governments by implementing systems for enrolment of the remaining formal sector independent verification and incentivizing • Ensure adequate financing for the JKN benefit results through non-financial rewards for package, while clearly and explicitly defining districts the JKN benefits package so that current public • Utilize the MSS as a mechanism for ensuring financing gaps can be clearly identified and delivery of essential services at the sub-national estimated level • Adjust the JKN benefits package to make it • Strengthen JKN linkages with much-needed, commensurate with current public financing externally financed health programs by ensuring resources, economic growth, projected macro- there is a smooth transition plan in place, fiscal trajectory, and service delivery capacity including clear mechanisms for government • Increase and expand coverage of the nonpoor service delivery, to ensure limited interruptions informal sector by improving awareness through and scalability of programs HEALTH FINANCING SYSTEM ASSESSMENT spend more . spend right . spend better Objective of This brief draws from the Health Financing System Assessment (HFSA), which is a diagnostic assessment protocol aimed at identifying critical constraints and This Brief opportunities facing Indonesia’s health financing system. The overarching objective of the main HFSA Report, as well as this policy brief is to inform the development of short-term and longer-term health financing strategies and reforms aimed at sustaining progress towards UHC. Background 1960 down to 23 per 1,000 live births in 2015. And while Indonesia has met the child-health related MDG, there is an unfinished agenda with regards to reducing maternal mortality and childhood stunting. Indonesia has also faced challenges in reversing HIV and TB epidemic, which have continued to increase Indonesia has a population of almost 260 million over the past several years. Additionally, some parts people and is a lower middle income country with a of the country continue to face challenges with GNI per capita of $3,238 USD ($10,680 USD in 2015 regard to malaria. 4 PPP terms) in 2015. The country has rebounded strongly from the Asian financial crisis in 1997 and At the same time, Indonesia is undergoing a rapid experienced robust economic growth over the past epidemiological transition. At almost 70 percent1, decade with the country’s GDP almost doubling from non-communicable diseases (NCDs) in 2015 account USD 580 billion in 2001 to USD 1.1 trillion in 2012, for the largest share of the burden of disease making Indonesia the 15th largest economy in the and this is expected to grow in the coming years. world and likely to achieve upper-middle-income Additionally, a demographic transition is projected status in 2018. While sustained economic growth over in the near future, including a rapid increase among the past 15 years helped to pull many people out of the population aged 65 and above. NCDs are also poverty, inequality has been increasing and access growing among younger age groups due to physical to basic health and social services varies significantly inactivity, unhealthy diets and tobacco use. These across regions, for instance some provinces in the new challenges are expected to increase the burden Eastern part has infant mortality rate (IMR) double or on the health system for which there is currently a even triple the national average.. Indonesia also faces low level of utilization, uneven distribution of services persistently high levels of informality in its labor force. and is largely focused on providing curative rather Currently, 60 percent of those employed are classified than promotive and preventative care. as ‘nonsalaried workers’, indicating that a large share of the nonpoor remain in the informal sector. As part of efforts to expand implementation of the national security system, Indonesia plans to Over the past decades, the country has also achieved reach UHC with everyone covered under its newly significant progress in key health outcomes. Life unified Social Health Insurance (SHI) program, expectancy has increased to 69 years in 2014, up JKN by 2019. SHI has undergone major reforms from 63 years in 1990 and only 49 years in 1960. in Indonesia in recent years. The universal right Likewise, the under-five mortality has declined to health care was included as an amendment from 222 per 1,000 live births in 1960 to 27 in 2015 to Indonesia’s constitution in 1999. However, the and infant mortality rate declined six-fold since impetus for expansion of SHI came a few years 1 Institute for Health Metrics and Evaluation, 2015. POLICY BRIEF Figure 1 Trends in Burden of Disease in Indonesia (1990 - 2015) 7% 9% 9% 8% 1990 2000 2010 2015 27% 37% 49% 58% 66% 56% 33% 43% Injuries Noncommunicable Communicable later through landmark legislation in 2004, which Meeting nationwide targets and accelerating established the Sistem Jaminan Sosial Nasional progress towards UHC by 2019 will not be limited (SJSN) law which formed the legal basis for expanding population coverage, measured in number achieving several social protection objectives. of JKN cards distributed, but will require significant Following up from SJSN, in 2011the Government efforts to improve the efficiency, effectiveness and of Indonesia introduced Badan Penyelenggara sustainability of the existing health system. Jaminan Sosial (BPJS) which further defined the 5 administrative and implementation arrangements. The decentralization of health service provision, BPJS paved the way for merging all single-payer budgeting and government expenditures also health insurance (SHI) schemes into one uniform poses unique challenges to implementing reforms package of benefits under a single-payer umbrella to the system of health financing. Currently, less by 2014, which is also known as the JKN program. than 40 percent of all national government health expenditures occur at the national level, with the However, there have been several challenges largest share, 57 percent, being incurred at the with the implementation and scale-up of the district level and 7 percent at the provincial level. JKN program. Currently, only about 7 percent While the central government remains the dominant of the nonpoor informal sector population has source of revenues, from around 6 percent of GDP JKN coverage, raising the challenges of adverse transferred to the sub-national level. The process selection, as well as, a “missing middle” with regards of interfiscal government transfers is also complex to healthcare coverage. The JKN benefits package and fragmented, often resulting in disconnects is not clearly defined in that all medically necessary between central-level policy and local-level service coverage is automatically covered without any provision. Currently, transfers between levels of copayments, balanced billing or expenditure caps. government are not linked to improved health This extremely generous basic benefits package outcomes or provider performance, limiting the stretches thin financial resourcing, as well as, the central government’s ability to enforce accountability capacity of the system to provide services leading or incentivize results from the use of resources. to implicit rationing and high out-of-pocket (OOP) for Unsurprisingly, issues with channelling sufficient households. Other challenges include (but are not resources for health between levels of government limited to) fragmented funding flows, mistargeting of have resulted in continued challenges for the JKN government subsidized beneficiaries (e.g. the poorest program where supply-side financing and demand- households) limited capacity to deliver services and side financing do not necessarily work together to non-collection among nonpoor informal workers. improve service delivery. HEALTH FINANCING SYSTEM ASSESSMENT spend more . spend right . spend better Figure 2 Trends in Government Health Spending by Level of Government (1995-2013) Rp trillion 1000 800 CENTRAL 600 PROVINCE 400 200 DISTRICT 0 1995 2000 2005 2010 2013 Source Indonesia COFIS database Note Data in 2013 constant IDR Understanding the Main Sources 6 of Health Financing in Indonesia Currently, there are four main sources of financing OOP BY HOUSEHOLDS for health which determine the equity, effectiveness At 45 percent of total health expenditures in 2014, and efficiency of services being delivered throughout OOP spending by households remains the largest the country. Adjusting the way health care services source of financing for health in Indonesia. OOP are currently financed in Indonesia requires a better payments connect utilization of health services to understanding of the main sources of funding, an individual’s or household’s ability to pay and are as well as the particular challenges they pose to largely considered to be an inefficient and inequitable sustaining and scaling-up services in the future. means of financing health systems. There are four Despite some increases in public financing in recent main reasons for the continued dominance of years, the fundamental structure of health financing OOP spending as a source of health financing: i) has remained largely unchanged in Indonesia due consistently low levels of public health spending; to parallel increases in OOP for health. Currently ii) incomplete breadth of coverage under the JKN Indonesia’s public health financing system is program; iii) poor supply-side readiness; and iv) the characterized by the coexistence of traditional public’s preference for branded pharmaceuticals government budgetary supply-side health financing which are currently not covered under JKN. and demand-side SHI financing. It remains unclear why this dual cofinancing modality remains and High levels of OOP spending by households are, in whether it is expected to change in the near to large part, a result of low levels of public financing medium term. for health. OOP payments are an inefficient and inequitable means of financing health systems and expose households to the risk of impoverishment that results from high levels of health expenditures (which constraints spending on other necessary expenditures). Currently, 7 million households in Indonesia are facing poverty or are pushed deeper POLICY BRIEF below the national poverty line because of high OOP. SHI OOP should only be used as a means for managing SHI expenditures are the third-largest source of overutilization and reducing waste and not as a financing for the health sector in Indonesia and primary mechanism for resource generation. In order account for 13 percent of total health expenditures. for OOP spending to decline significantly in Indonesia, BPJS revenue from contributions in 2015 amounted public financing for health must increase at a rate to almost IDR 52.8 trillion (USD 3.96 billion) and are faster than the rise of OOP for health. pooled from three broad categories of people the poor and near-poor; salaried workers in the formal GOVERNMENT sector; and nonsalaried, nonpoor workers in the Government budgetary supply-side health spending, informal sector. Although Indonesia has successfully both at the central and sub-national level, is the implemented a single-payer SHI system covering second largest component of health financing. more than 60 percent of the population, it still Despite recent increases, government health accounts for only a relatively small share of total spending in Indonesia remains one of the lowest health expenditures. This is due to low contribution in the region and in the world, at just 1.5 percent collection, particularly among nonpoor informal of GDP. Low levels of spending are a result of low workers (who must contribute to enrol in JKN and for prioritization of health and limited ability to generate which JKN coverage has been limited), and that SHI revenue. Indonesia’s revenue share of GDP was reimbursements do not cover the full cost of care. only 112 percent in 2015, far lower than other lower- middle income countries (28 percent) and less than EXTERNAL SOURCES half the average for other countries in the region. The fourth largest source of financing, funding Although there was a significant increase in 2016, at from external sources such as international just 4.7 percent, health’s small share of the central donors, accounts for only 1 percent of total health government budget also reflects low prioritization, expenditures. Still, they remain a critical source of 7 and is small in comparison to the Philippines, China financing for priority programs such as immunization, and Thailand. HIV/AIDS, TB and malaria. Figure 3 SHI Coverage and OOP Share of Total Health Spending (1995-2014) OOP 800,000 60 Percentage spending (%) per capita OOP spending share of THE (right axis) (IDR) 600,000 40 400,000 SHI coverage (right axis) 20 200,000 OOP spending per capita (left axis) 0 0 1995 2000 2005 2010 2014 Source World Development Indicators database and SUSENAS (various years). Note OOP spending is in 2014 constant IDR. 2 University of Indonesia (2105). Taxes and Social Policy: Sustainable Growth under Informality. Institute for Economic and Social Research, University of Indonesia. HEALTH FINANCING SYSTEM ASSESSMENT spend more . spend right . spend better Key Policy Recommendations: and near-poor households who are denied cards Spend More despite being eligible. Stronger and clearer links to contextual factors, such as decentralization and JKN are key to the Increasing public financing for health is a critical sustainability of much-needed externally financed condition for reaching UHC in Indonesia. No country health programs. Although not a dominant source has attained adequate SDGs and reduced OOP of overall health financing, external resourcing from on health to less than 30 percent of total health international development partners may bring global spending without public expenditure on health being experiences, introduce innovative interventions and at least 2.7 percent of GDP. While Indonesia has fill a funding gap for critical programs where the recently increased its government health spending, government budget has less flexibility. However, it remains one of the lowest in the world at just 1.5 decentralization poses a significant risk to the percent of GDP. Public financing for health will need sustainability of externally financed health programs, to rise significantly beyond currently levels in order particularly between public financial management, for Indonesia to make progress on improving service and procurement and distribution of inputs, such as coverage and financial protection. Acknowledging vaccines and drugs, at the central government level, the challenges in increasing the fiscal space for and to day-to-day management of facilities and public financing, key options to address the current services at the district level. Donor-funded programs deficit includes a combination of: i) increasing also come with disadvantages such as reporting nonoil and gas tax revenues; ii) central government and monitoring requirements, fragmentation of reprioritization of health spending (including from planning and challenges to managing funding flows. reduced energy subsidies); iii) earmarked tobacco As JKN expands coverage, the key to the financial 8 taxes; iv) complementary subnational financing; and institutional sustainability of these programs v) targeted incentives and penalties for enrolling will be to better integrate them within the context the informal sector; and vi) incentives to formalize of UHC. Greater integration would not only serve participation of informal sector workers. as an indicator towards UHC attainment, but also as a program element to which a proportion of The sustainability of SHI as a source of health intergovernmental fiscal transfers and BPJS provider expenditure in Indonesia is contingent on eliminating payments can be linked. Some of the additional mistargeting of the poor and vulnerable and benefits of closer integration of these programs expanding coverage for the nonpoor. Although with UHC include more effective coordination of Indonesia has successfully instituted a single-payer comprehensive service delivery, including greater SHI system, few nonpoor informal workers have collaboration of monitoring and evaluation activities. enrolled making contribution collection difficult. Those that have enrolled are those most likely In order to clearly identify funding gaps and to need health care, which undermines equity future health financing needs, the complete JKN and threatens the financial sustainability of JKN. benefits package needs to be made explicit and Mistargeting of non-contributory cover also poses commensurate with financing and service delivery challenges for enrolment particularly for the poor capacity. To ensure that JKN’s covered services and and near-poor. Only about half of the poorest 40 benefits are available for all members and that the percent of households, all of whom should have resources (both financial and human) required to central government-financed coverage, reported deliver the benefits are available, the JKN benefits being enrolled in JKN. Although improvements in package needs to be more explicit and adjusted socialization, awareness and availability of benefits in line with current public financing resources, may increase enrolment and prevent mistargeting, economic growth, service delivery capacity and global experience indicates that this may not the projected macro-fiscal trajectory. While the be sufficient and alternatives would need to be current benefits package is comprehensive, it is not considered. In the short to medium-term, measures explicit in that all medically necessary coverage is must be taken to validate lists of eligible beneficiaries automatically deemed to be covered without any at the district level and provide clear options for poor co-payments, balanced billing or expenditure caps. POLICY BRIEF Furthermore, there is only a negative list for items However, improving the efficiency of Indonesia’s such as formulary drugs, meaning what is positive system of health financing means not only ensuring (or covered under the program) is often inferred that resources are directed towards individuals and by providers from national guidelines. In particular, regions who most vulnerable. Technical efficiency, branded drugs which are not currently included which is discussed below, requires investing scarce in the JKN package are one of the key drivers of resources in to interventions that ensure service high OOP spending by households. Indonesia may quality and accountability for meeting minimum learn from other countries’ experiences in how to service standards. move from a comprehensive benefit package to a basic set of explicitly defined benefits, guaranteed Improving equity and efficiency of coverage also with adequate financing from public sources (via includes providing public health interventions at government budgetary supply-side expenditures the population level focused more on preventative or SHI). In the future, mechanisms can be enacted and promotive care. The epidemiological transition to ensure that subsequent benefit expansions are in Indonesia towards NCDs means growing OOP commensurate with parallel expansions in public expenses for many Indonesians not covered by financing for health. JKN, or in some cases, forgoing needed treatment all together. At a macro-level the epidemiological transition will lead to a mounting fiscal burden on the JKN system which will threaten its long-term Key Policy Recommendations: sustainability. Providing treatment and education for Spend Right the population, particularly focused on NCDs, has been shown to be a cost-effective strategy for driving behavior change and lifestyle modification across the greatest number of individuals. For example, 9 tobacco taxes could be used to reduce alarmingly Health financing reforms need to consider not just the high smoking rates in Indonesia, or at the primary- sufficiency of resources, but also the efficiency, equity care level, support provided for early diagnosis and and effectiveness of how resources are raised, pooled treatment, as well as expanded community-level and allocated towards improving health outcomes. outreach. Preventative and promotive population- There are significant geographical differences in level treatment is also needed to address persistent the availability and quality of basic health services, deficiencies across other public health challenges especially for those living in relatively remote, rural including access to modern family planning, DPT3 and low-income communities. For many, these immunization coverage and improved access to supply-side constraints translate into limitations in sanitation and hygiene behavior change. However, the effective availability of JKN benefits. Constraints less than 1 percent of JKN expenditures are for any include fewer numbers of qualified doctors, nurses preventative or promotive activities, with the bulk of and midwives; limited hospital beds; shortages or expenditures going toward hospital –based inpatient out-dated medical equipment and technology; and care. This supports concerns that the over-emphasis the unavailability of medical supplies. Supply-side of curative and rehabilitative care in UHC distracts constraints include not just shortages in numbers, from much-needed improvements to primary health but also in the distribution of services and providers. care delivery, as well as population-level public Rural and remote areas not only have fewer health health interventions. facilities, but also face difficulties associated with retention of health personnel. In these areas JKN Improving public and private provider supply-side functions more like a demand-side top-up for a readiness to serve all Indonesians, regardless of constrained and under-resourced supply-side income or location, requires greater integration of system, rather than a fully-fledged SHI program. JKN supply and demand-side financing. As financing still does not yet reimburse the full cost of providing gradually shifts from the supply-side to the demand- care to patients which includes salaries, capital and side in Indonesia’s health system, an appropriate some additional operating costs which are currently level of autonomy for health facilities—coupled with reimbursed by national and local government funds. enhanced technical assistance to improve capacity HEALTH FINANCING SYSTEM ASSESSMENT spend more . spend right . spend better to manage revenues—needs to be provided to public Key Policy Recommendations: health facilities. This includes improving the quality of facilities and human resources for health, through Spend Better implementation of a robust quality framework and additional measures to encourage additional accreditation and certification. It also means providing Choosing the right kinds of interventions and facilities greater discretion on how capitation funds implementing them with improving efficiency are as are utilized, and reimbursed from BPJS so that they important as spending better with the limited resources are no longer used as ‘general purpose’ funds for available. In order for health financing systems to district governments. However, greater autonomy in radically improve in Indonesia, policy needs to focus how facilities can spend funds should be balanced on promoting not just the right kinds of interventions, with improvements in supply-side accountability but enhancing overall technical efficiency aimed at for providing quality care, particularly in rural and maximizing and improving service delivery from the remote communities. At the puskesmas level, where limited resources available. In practical policy terms, the predominant provider payment method for improving technical efficiency means looking for health facilities is capitation, payment should be opportunities to reduce costs without sacrifices to the linked either directly or indirectly to the attainment of amount or quality of services available. A WHO report minimum service standards. Similarly, at the hospital examining the leading causes of inefficiency in the level diagnosis-related group payments could health sector found ten leading sources: i) underuse be made conditional on the adequacy of services of generic medicines and higher than necessary provided in order to encourage investments in prices for pharmaceuticals; ii) use of substandard and improving service readiness. Additional consideration counterfeit medicines; iii) inappropriate and ineffective should also be given to integrating and encouraging use of medicines; iv) supplier-induced demand and 10 greater supply-side readiness for private providers overuse of select services; v) inappropriate staff through adequate capitation amounts which would mix and unmotivated workers; vi) inappropriate act to level the playing field with public sector hospital admissions and length of stay; vii) low use of facilities, which already receive subsidies. As the infrastructure; viii) medical errors and suboptimal quality system evolves and continues to scale-up, greater of care; ix) waste and fraud; and x) inefficient mix and consideration should be given to additional measures inappropriate level of interventions.3 aimed at mitigating negative incentives of capitation systems, such as over-referral, under-treatment and Linking JKN provider payments with results maximizes inappropriate referral to secondary care. limited resources by incentivizing improved provision of quality preventative and promotive care. Performance-based financing has the potential serve as a tool to incentivize health systems and health providers to move towards expanded coverage of quality preventative and promotive care. Recent expansions in both coverage and access to health services have not been accompanied by expansions in the quality of human resources for health. Key challenges to improved quality are a misallocation of workers, shortages of specialists and inadequate skills of healthcare personnel. One of factors contributing to persistently low quality service provision is the tradition of dual practice, whereby clinicians try to combine public-sector clinical work with fee-for-service private 3 Chisholm, D., and D.B. Evans. “Improving health system efficiency as a means of moving towards universal coverage.” World Health Report (2010), Background Paper No. 28. Geneva: World Health Organization POLICY BRIEF practice in order to ensure adequate salaries and of financial resources from the central government working conditions. Dual practice, which remains are based on district characteristics, the capacity of largely unregulated and unsupervised in Indonesia, districts to plan for, absorb and realize outcomes/ has led to high rates of absenteeism and challenges outputs is often not a determining factor in the deploying physicians to remote areas. Currently distribution of financing. Instead, the focus of provider payment mechanisms under JKN are national policy makers has been on ensuring ‘passive’, meaning that there are no explicit linkages that districts adhere to regulations rather than with outputs or outcomes. Tying provider payments on building capacity to more effectively utilize to attainment of population-level service coverage resources for improving health service delivery. targets (including preventative and promotive More needs to be done to improve the capacity of care) could be piloted as a potential mechanism health facilities and district governments particularly for improving service readiness, expanding service in the area of public financial management (PFM). coverage of key priority programs and enhancing This includes technical assistance and incentives efficient spending in the future. to strengthen planning and budgeting skills, as well as, reform organizational and overall fiduciary Increase effectiveness of inter-governmental transfers arrangements. Strengthening PFM competencies by linking them to results and performance in order to will ensure that any additional resourcing to districts improve the quantity and quality of health services in is absorbed and utilized effectively towards meeting remote and lagging districts (regions). Decentralization future public health needs. in Indonesia has contributed to a complex and highly fragmented system of interfiscal government Minimum Service Standards (Standar Pelayanan transfers, resulting in wide variations in health policy Minimal, or SPM) are essential mechanism for prioritization and spending across districts. While ensuring delivery of essential services and most districts spend approximately 10 percent of promoting accountability at the sub-national level. 11 their budget on health (as required by law) some Recent changes to the Decentralization Law in view health as a revenue-generating sector, pooling Indonesia have provided greater clarity on the user fees collected from public health facilities with distribution of governance affairs and authority other sources of revenues to allocate across other between central and regional governments, sectors. Accountability measures such as improved presenting an opportunity for central government monitoring and evaluation systems and nonfinancial to leverage the SPM as a mechanism for holding and financial performance incentives can be used as regional governments accountable for achievement a strategy for linking fiscal transfers with results – such of minimum services standards. SPM aims to ensure as achievement of the minimum service standards for the delivery of essential services and ensures health. Some examples of nonfinancial incentives that accountability across different levels of government can be used to motivate accountability and incentive through a shared set of indicators for measuring achievement include benchmarking, public notification results. As a planning and budgeting tool SPM is and rewards. also expected to serve as a reference for how local governments can prioritize budget allocations for Improvements to the availability and distribution of basic health services. However, in order for SPM to health providers needs to be complimented with be used effectively as a mechanism for ensuring systemic improvements such as those aimed at sub-national compliance, clear strategies for follow- improving local governments’ capacity to prioritize, up and enforcement need to be developed to plan, budget and effectively use available supply determine the degree to which SPM can be used to and demand-side financing. While some allocation drive sub-national health outputs. HEALTH FINANCING SYSTEM ASSESSMENT spend more . spend right . spend better Looking Ahead Towards other Areas of Future Policy Analysis and Research This research brief lays the groundwork for additional for improving the effectiveness of the current policy analysis and research needed to explore provider payment mechanisms as instruments other cross-cutting issues affecting the overall to influence providers in their contribution to performance of Indonesia’s health system. Additional achieving UHC. areas for exploration include: • Fiscal Space for Healthcare Spending: Providing more revenue for health spending in Indonesia • Informal Sector: Understanding informal sector will require a mix of strategies including revenue is key in expanding JKN population coverage earmarks and the potential implementation of including global best practices, and insights tobacco excise earmark for health. into health seeking behaviour and social • Measuring the Financial Protection Functions insurance coverage among the informal sector of JKN: Additional research is needed on in Indonesia. understanding the current performance of • Provider Payment Mechanisms & Strategic the national SHI (JKN) in achieving its financial Purchasing: Improving provider payment protection goals. mechanisms is central to expanding coverage • Exploring issues of Effectiveness and Efficiency: and ensuring quality. Additional work is needed Assessing the ability of the recent health financing 12 to explore the challenges to and strategies reform in addressing inequality issues in health. This policy brief was a summary of the Indonesia Health Financing System Assessment (HFSA) report published in October 2016. In addition to the HFSA authors, this brief was prepared by Rebekah Pinto, Emiko Masaki, and Pandu Harimurti. Funding from this policy brief was made available by all development partners funded the production of HFSA report. For any questions regarding this brief, please contact Pandu Harimurti (pharimurti@worldbank.org) The full HFSA report is available for public at the following link http://www.worldbank.org/en/country/indonesia/research/all?majtheme_exact=Human+development&qterm=&lang_ exact=English