Functional and Regulatory Review of Strategic Health Purchasing Under JKN POLICY NOTE July 15, 2018 Executive Summary With over 70% of the country’s population having • Strategically decide what to buy: which coverage under Jaminan Kesehatan Nasional (JKN), interventions, services, and medicines Indonesia now has one of the largest national health • Strategically decide from whom to buy: which insurance programs in the world, in terms of population providers and suppliers of medicines / other coverage. However, at present only about 15% of total commodities health expenditures come from JKN and there remains • Strategically deciding how to buy: which payment significant co-financing from supply-side budgetary methods, payment rates, other contractual conditions expenditures at public facilities. The government plans for everyone to have coverage under JKN, with universal There are some foundational steps that are pre-conditions health coverage (UHC) by 2019 as part of implementation for strategic purchasing and that make more sophisticated of the Health Social Security Act. strategic purchasing approaches possible in the future as systems mature (see Box 1). Strategic purchasing Despite recent increases, however, the level of public requires that the purchasing functions are distributed financing for health remains low. The country faces appropriately across the institutions involved, and the a tighter macro-fiscal environment on the one hand, roles and responsibilities are clear. versus a growing demand for and utilization of health care as coverage expands under JKN. Expenditures The regulations on the institutional roles and functions on JKN are increasing more rapidly than revenues, for JKN are still transitioning and need to be clarified. and financial sustainability has emerged as a concern. BPJS-K has responsibility to manage the single pool Improving the efficiency of JKN expenditures is of funds in JKN, but many purchasing functions and necessary for making progress towards UHC, and there decision-making authority continue to be housed is an imperative to make better use of existing funds within the Ministry of Health (MOH). through strategic purchasing of JKN services. The Social Security Council (Dewan Jaminan Sosial Stakeholders defined strategic purchasing for Indonesia as: Nasional--DJSN) commissioned a functional and regulatory review of strategic purchasing under JKN in Ability to purchase preventive, partnership with USAID, the World Bank, Abt Associates and Results for Development (R4D). The review promotive, curative and examined existing legislation and regulations that relate rehabilitative services to improve to strategic health purchasing functions to identify: the health of members and get maximum results. • Which institutions are responsible for carrying out which purchasing functions according to the regulations; Strategic health purchasing organizes relationships • Whether there are any regulations that are in between individuals, health providers, and (typically) conflict with one another; a third-party purchasing agency acting on behalf of • How the functions are being carried out and covered individuals (Figure 1). Strategic purchasing whether a different allocation across institutions involves three main sets of decisions: would improve the implementation of the function OVERVIEW OF STRATEGIC PURCHASING FUNCTIONS UNDER JKN BOX 1. FOUNDATIONS OF STRATEGIC HEALTH PURCHASING Strategic purchasing requires an institutional home where most purchasing functions will be carried out, although other institutions will likely be responsible for some purchasing functions. being clear and deliberate about what is being purchased, which starts with a well-defined benefits or essential services package. Once the service package is defined, the purchaser pays health providers specifically to deliver these services, which is referred to as output-based payment. Output-based payment typically goes hand-in-hand with some form of contracting to clarify the obligations of the provider and also the purchaser, including quality standards and assurance mechanisms. It also requires that providers have some autonomy to make decisions to respond to incentives—they can decide to shift their staff around or other inputs. All of this requires new accountability measures and better use of information. Summary of the Findings The review found that the regulatory environment quality control system, and health service payment 2 for implementing JKN is dynamic—in terms of and system to improve the effectiveness and efficiency of can cause confusion with implementation on the health insurance.” A 2013 regulation [Presidential ground. Changes in regulations in terms of their regulation no 111 of 2013], however, states that BPJS-K number and revisions reflect the dynamic process should coordinate with “relevant ministries” to develop in the implementation of JKN. Other issues include the technical operation of the health service system, overlapping regulations, unclear regulations, and quality control system, and health care payment discrepancies between the rules for the central and system to improve the efficiency and effectiveness regional governments. Some consequences of these of the JKN. So the ultimate responsibility for the challenges are summarized below. implementation of JKN is unclear. Furthermore, BPJS-K as a legal public entity reports directly to the President, but its position relative to the MOH (at the same level OVERALL RESPONSIBILITY FOR HEALTH or under it) has not yet been definedThis lack of clarity PURCHASING UNDER JKN and contradiction has prevented BPJS-K from taking on the overall function of health purchasing under JKN. The main finding of the review is that there is a lack of clarity between the legislation and regulations The key areas where conflicts or overlap in regulations supporting the implementation of JKN related to are creating challenges for JKN implementation are the overall responsibility for strategic purchasing. summarized below. Although the original 2004 social security law allocated most of the key purchasing functions Accountability (provider payment methods, tariff-setting, and quality Although accountability for the implementation of monitoring) to BPJS, a series of regulations brought JKN is mentioned throughout the regulations, and it these functions back at least partially back under the is one of the core principles of the social security law, control of the Ministry of Health. there are few mechanisms to ensure accountability. Financial accountability is clearly the function of the The 2004 social security law states that “The Social Audit Board, and some oversight functions are assigned Security Administering Body (BPJS-K) shall develop to several ministries and other bodies. But overall, it is a health service system for the members, a service not clear which institutions are held accountable for POLICY NOTE which outcomes of JKN implementation and whether went to first-level providers (FKTPs). Inadequate the responsible institutions have adequate capacity infrastructure and supply of essential medicines at the to carry out their functions and ensure accountability. FKTP level were identified by stakeholders as factors Finally, local governments are accountable for driving referrals. “adequate implementation of JKN implementation,” but adequate implementation is not defined and no consequences for non-compliance are specified. FROM WHOM TO PURCHASE: SUPPLY- SIDE READINESS, CREDENTIALING AND SELECTIVE CONTRACTING WHAT TO PURCHASE: SERVICE PACKAGES AND REFERRAL POLICY Strategic purchasing requires adequate service delivery capacity (“supply-side readiness”) and effective The JKN entitles participants access to a comprehensive instruments to select and contract with available package of necessary health services, including providers. The supply-side readiness function is almost comprehensive primary health care (PHC) and referral entirely the responsibility of local governments services. There is lack of clarity in the JKN law and in Indonesia. The regulations on the role of local regulations, however, about authority for setting government create a conflicting incentives and standards of care for referral services purchased by priorities for ensuring the effective implementation of BPJS-K. Although Law No 40/2004 Article 24 states it is JKN within limited resources. There is a highly variable the role of BPJS-K to establish quality control and cost service delivery structure with uneven capacity control systems, implementation is incomplete, and because of different priorities across local governments, BPJS-K is limited in its ability to enforce some policies. and sometimes a mismatch between investment and the service delivery needs of the population, which For example, reducing inappropriate referrals is an has implications for both cost and effectiveness of 3 important strategic objective for BPJS-K as a purchaser JKN implementation. There is indication of local to manage costs and improve quality. There is a tiered governments: referral policy in place that limits referrals according to level of care (e.g. class C hospitals can only accept • Redirecting local budget funds to pay JKN premiums referrals from primary care providers (PCP); class as they integrate Jamkesda into JKN; B hospitals can only accept referrals from Level C • Reducing budgets for primary health care in hospitals, etc.). In the future, this referral system response to JKN capitation revenue at the facility will move toward competency level of hospitals. level and over-investing in hospitals. But it is unclear to what extent the BPJS-K has the • Not effectively pursuing private sector investment power to enforce the tiered referral policy by, for to fill service capacity gaps. example, refusing to pay for inappropriate referrals. The MOH also has recently enacted a stricter referral Supply-Side Readiness in Rural and Remote Areas policy, which limits payment for hospital cases that The geographical conditions in several Indonesian were not referred by the appropriate class of health regions create obstacles to implementing JKN, which facility. BPJS-K has begun refusing to pay claims for limits access of JKN participants promised services. inappropriate referrals, but this has been challenged Below are problems faced by remote areas and special by specialists. Furthermore, the lack of availability of areas in general: certain medicines in puskesmas makes it difficult to enforce the referral system consistently. The rate of • Limited fiscal capacity in some regions has limited inappropriate referrals remains high, and BPJS-K found the infrastructure, supply of health personnel, and that 1.2 million cases were referred directly to class A availability of health facilities adequately equipped hospitals by primary care providers. to provide health services as needed by the local population. Regional governments in these areas The continued high rate of inappropriate referrals is are often unable to provide sufficient incentives to both caused by under-spending in the PHC sector, and attract the specialists to work in these places. continues to exacerbate the imbalance of spending • As a result of difficult access/transportation to the as less than 20% of expenditures by BPJS-K in 2016 health facilities due to poor geographical conditions OVERVIEW OF STRATEGIC PURCHASING FUNCTIONS UNDER JKN and transportation, the populations of these areas HOW TO PURCHASE: CONTRACTING, are less able to make use of JKN services, although PROVIDER PAYMENT AND QUALITY they are equally entitled to services. MONITORING • Geographic challenges increase the distribution costs of drugs purchased through e-catalog to the district The presidential regulations stipulate that provider capital cities. Regional governments have limited payment system development should be carried by budget to absorb the costs of distributing drugs to the the MOH in coordination with BPJS-K. Payment rates regional puskesmas. should be determined through negotiation between • Often the drugs needed are not available in e-catalog BPJS-K and related associations at the regional and the procurement outside of e-catalog is more level (market region) with reference to the standard expensive. As a result, certain drugs are not available tariffs specified by the MOH. [The market region is at all in some of these areas. more important and more flexible compared to the • One of the funding sources which may be optimized administrative region, since the production costs of is the utilization of compensation funds as regulated providing services may encompass various districts under Article 23 paragraph 3 of Law No. 40 of 2004 or provices with relative similar costs.] In practice, the on SJSN that reads as follows: MOH retains authority for the function of provider • Compensation funds could be an alternative for payment policy and rate-setting, while BPJS-K is source of health expenditure in some rural and mainly responsible for paying provider claims. remote areas with low fiscal capability. The policy on the use of compensation fund has not been further Capitation payment is used to purchase PHC services regulated in the lower regulations, however, thus from FKTPs (puskesmas and private clinics) and case making it difficult to implement. In addition, with based payment (INA-CBGs) is used to purchase referral the continous deficits of BPJS-K, the compenstion services from hospitals under JKN. The capitation rate 4 funds may not even be available. In contrasts, many and INA-CBG tariffs are considered to be low overall, local governments can not absorb their budgets for but a more general concern is that the payment various reasons. systems used to purchase services under JKN are • Coordination between local governments, national fragmented across different levels of care. There is government, and BPJS-K need to be established to currently no linkages between capitation for PHC overcome access problems in remote areas. and the INA-CBG payment system for secondary and tertiary services. Furthermore, current JKN purchasing Credentialing and Selective Contracting mechanisms do not create a level playing field for To ensure service quality for JKN participants, private providers and encourage investment. BPJS-K providers contracted by BPJS-K must meet certain pays the same capitation and INA-CBG rates to both standards (credentialing). The regulations state that public and private providers, although public providers credentialing and re-credentialing for facilities to are highly subsidized by the government for health contract with with BPJS-K must use technical criteria, worker salaries and investment costs which are not agreed performance assessment, and involve District/ counted in payment rates. Private providers also City Health Offices and/or Health Facilities Association. cannot access medicines at favorable prices through In reality, professional organizations have not been e-catalog and are subject to business taxes. If the funds significantly involved in the credentialing process. flowed through APBN and APBD are counted, the The JKN credentialing criteria demand accreditation current payments to public health care facilities are certificates of such health facilities, but until 2017, actualy higher. only 56% of hospitals and about 15% of puskesmas contracted by BPJS-K are accredited. The regulations Capitation have been amended, and now the accreditation must A number of challenges have been identified in the be accomplished by 2020. design and implementation of capitation: • There are currently no adjustments to capitation for age/sex, geography or other indicators of health need, only supply side variable such as availability POLICY NOTE of medical doctor and dentist and 24-hour services the relative tariffs are too low, in some cases (e.g. are taken into account to a small degree. MoH cataract) the relative tariff is too high. Regulation No. 52 of 2016 article 5 set the special • Because tariffs are higher for hospitals of higher capitation tariff for remote areas, but the amount is classes, there are incentives to invest in expensive considered too small as the compensation for the equipment to upgrade the hospital. If the case physician practices in remote areas. groups for the INA-CBGs were technically valid, • The distribution of registered participants across however, the level of hospital would not need to FKTPs is highly imbalanced. The average ratio of be part of the tariff, because higher level hospitals registered JKN participants per doctor in FKTPs is would treat more severe cases and automatically 5,000:1 (which is the target), but the ratio exceeds receive higher payments. 8,500:1 for puskesmas in 7 provinces. On the other hand, private PHC providers appear to be at a Monitoring and Quality Assurance disadvantage in the distribution of participants, The review showed a duplication in the responsibility with ratios typically below 1:2,500. for provider monitoring and quality assurance, • Presidential regulation 32/2014 regulates the with ultimate authority over the function residing utilization of capitation funds, but some regions with the MOH but the data required for adequate consider capitation income as a regional income provider monitoring are under the control of BPJS-K that is utilized in accordance with local policy without clear sharing mechanisms. Both Presidential puskesmas are increasingly given discretion to Regulation Number 12 of 2013 on Health Care Benefits manage their own financial affairs, and a number and Regulation of the Minister of Health Number of the facilities have been converted to BLUD 71 of 2013 CHAPTER VI Quality and Cost Control puskesmas, which allows them to manage their Article 38 state that BPJS-K is for monitoring provider own finances autonomously. Even in autonomous performance, although the same regulations also give puskesmas, however, the complicated rules on the the MOH responsibility for monitoring and quality 5 allocation of capitation revenue have led to low control, so the institutional responsibility for this absorption in some cases, with the revenue taken function is unclear. back by the government treasury if it remains unspent at the end of the year. It is unclear whether BPJS-K has the authority to act on findings of the cost and quality control teams, such Performance-based capitation (KBK) for puskesmas as from the utilization reviews, and what actions was implemented in 33 provincial capital cities as they would be authorized to take. In addition, BPJS-K part of phased implementation. There has been no maintains several data sources, including claims data evaluation of KBK, so it is not possible to determine and P-Care database but these data are not linked whether it has been effective. In the private PCPs, the or shared for monitoring and evaluation. Routine KBK has been suspended due to lack of supports from monitoring system with a standard set of indicators the professional association. analyzed and reported regularly has not yet been put in place. INA-CBGs MOH PPJK, together with BPJS-K, calculates the costs of services in the INA-CBG and sets the hospital tariffs. Since most of the public hospitals, in particular class A and some class B, are owned by the central MOH, there are concerns that the MOH may have conflicting interests in the price-setting. A number of challenges have been identified in the design and implementation of capitation: • CBG grouping and weights do not adequately capture relative cost differences for different diagnoses and severity of cases. While in many cases OVERVIEW OF STRATEGIC PURCHASING FUNCTIONS UNDER JKN Options to Improve Strategic Purchasing Under JKN The table summarizes key issues and options to improve strategic purchasing of services under JKN. KEY ISSUES TO ADDRESS IN THE INSTITUTIONAL STRUCTURE FOR STRATEGIC HEALTH PURCHASING UNDER JKN Purchasing Related Regulations Options for Improvement Function Accountability Law no. 40 on the National • Strengthen accountability with clear definition of which institutions are Social Security System responsible for which outcomes of JKN implementation. • Clarify the mandate and accountability of BPJS-K as both a health and a Law No. 24 of 2011 Chapter finance institution able to purchase health services effectively and efficiently, VIII Accountability Article 37 increasing accountability for access to service by JKN participants, effective and efficient service delivery, quality of care, and cost management. • Establish a routine monitoring system based on a jointly used database of BPJS-K claims data, other MOH service utilization data, and other key indicators and data sources. Strengthen the DJSN mandated role to monitor JKN. • Establish a link between central-level financial transfers to sub-national 6 governments and accountability for JKN implementation. What to purchase Service delivery Law No 40/2004 Article Gradually shift authority to BPJS-K to select which service delivery and quality standards 19 President Regulation standards (e.g. standard clinical practice guidelines) will be used for purchasing number19/2016 article 43 A services by regions, even if the agency does not develop them From whom to purchase Supply-side readiness Law Number 23 year 2014 • Establish regional-level joint service delivery planning team including concerning local government representation of local governments, District Health Offices, professional associations (public and private), and local branches of BPJS-K to discuss Regulation of Minister of service delivery investment needs to meet service delivery standards but in Health No. 71 of 2013 consideration of the budget impact on BPJS-K. • Increase regional commitment to allocate funds used to build adequate health facilities, particularly in rural and remote areas. • When the BPJS-K funding is adequate and deficits are stabilized, improve regulations to allow compensation fund from BPJS-K as an alternative for source of health expenditure in some rural and remote areas with low fiscal capability. • Increase partnerships with the private sector, particularly for rural and remote areas, with the payer for the health care, BPJS-K, as the guarantor. Selective contracting Regulation of Minister of • Increase the role of BPJS-K in the contracting function by giving greater Health Number 69 on Health authority to establish provider selection criteria, establish the terms of Services Standard Rates At contracts, negotiate contracts with both public and private providers, and First Level Health Facilities monitor and enforce contracts. and Advanced Level Health • Implement the BPJS-K credentialing process in a participatory way with Facilities in Health Insurance DHOs, local governments, professional associations (public and private), Program Implementation and other stakeholders to jointly carry out mapping in the regions, analyze population growth, and project future supply needs for JKN. • Create more opportunities and incentives for private providers to contract with BPJS-K: • Specify the role of private providers in JKN/BPJS-K regulations • Engage private professional associations in credentialing POLICY NOTE Purchasing Related Regulations Options for Improvement Function How to purchase Contracting and Regulation of Minister of • Increase the role of BPJS-K in the selection and development of provider provider payment Health Number 69 on Health payment systems, and provider rate-setting by regions to consider cost policy Services Standard Rates At differences. First Level Health Facilities • Explore options to better harmonize between capitation payment for PHC and Advanced Level Health and INA-CBG payment for secondary and tertiary services. Facilities in Health Insurance • Consider establishing an independent provider payment policy analysis Program Implementation unit to gather cost information, conduct analysis to inform provider payment system design and parameter development, and budget impact analysis (possibly built from the MOH Case Mix Unit and DJSN) Capitation • The capitation rate-setting should be more explicitly linked to the package of services and, include adjustments for geography, the age and sex of registered individuals, and other factors related to health need. • The capitation payment system should be refined to include regulations on the upper and lower limits of ratios of registered participants to full time physicians in a PCP. • The performance-based component of capitation should be evaluated and revised to ensure that the prices and incentives are aligned with quality of service delivered and rural/remote PCPs are not disadvantaged. INA-CBGs • The INA-CBG payment system should be refined to improve alignment between case groups and relative service delivery costs. • The hospital costing system should be evaluated and possibly refined for both public and private hospitals. • In some appropriate regions, consider transitioning the INA-CBG payment system to a budget-neutral payment system (either volume caps, global 7 budget, or adjustable base rate). Provider autonomy Regulation of Minister Test a capitation waiver that allows puskesmas meeting certain criteria to of Health Number 19 of pool revenues from multiple sources (capitation, BOK, local funds, etc.) with 2014 regarding the Use increased autonomy for management and allocation of funds. of Capitation Fund of the • Set up a district-level platform for communication and monitoring among 4 National Health Security entities: DHO, BPJS-K, puskesmas providers, and local government. For Health Care Service And • Monitor effects on service delivery. Operational Cost Support on Regional Government-Owned First-Level Health Facilities MOH regulation no 21/2016 Provider performance Regulation of Minister of • Improve the P-Care data system and bridge to local data systems to monitoring Health Number 71 of 2013 effectively allow PCPs to evaluate their performances for planning, CHAPTER VI Quality and Cost management, and improvement of clinical services and link it to the Control Articles 33, 37 and 38 BPJS-K claims database. • Establish a routine monitoring system within BPJS-K that analyzes and Regulation of Minister of reports on a set of standard indicators related to service delivery and Health Number 71 of 2013 other key JKN outcomes. The monitoring results should be fed back to the Chapter VII Reporting And health care provider association to improve performance. Utilization Review Article 39 • Build on the BPJS-K cost and quality control team to build a joint provider monitoring and quality assurance commissions at the district and/or regional level, including representation of the local branch of BPJS-K, DHO, and local government. • Establish the authority of BPJS-K to act on results of the cost and quality control teams utilization reviews, etc. and possible link to financial or other incentives.