Indonesia’s health services: Relaxing trade policy barriers for better performance POLICY BRIEF Presisi Indonesia, University of Adelaide and The World Bank Trade policies can affect the development of the higher education and tertiary health services sectors in Indonesia. While they are not the only policies that matter, international experience shows that increased openness to foreign service providers can help upgrade domestic health sectors, particularly tertiary healthcare services. That is why Indonesia’s less open and more restrictive policies relatively to Malaysia, Singapore and Thailand are a source of concern. Access of foreign providers, both businesses and skilled practitioners is constrained as indicated by Figure 1 which ranks Indonesia against regional comparators on the basis of the Services Trade Restrictiveness Index (STRI).1 Figure 1: Services Trade Restrictiveness Index: Health Services Commercial presence 1,0 0,8 0,6 0,4 0,2 0,0 Other discriminatory Movement of people measures Indonesia Malaysia Thailand Singapore Source: See note 1.. With the highest possible score of 1 in the STRI, the movement of foreign medical professionals is particularly restricted in Indonesia, much more so than other regional comparators. It is de facto impossible for foreign professionals – particularly medical doctors - to operate in Indonesia due to a combination of Indonesia-specific professional requirements and tight screening by the Indonesian medical doctors’ association. There are only 41 foreign medical doctors working as 1 This index is compiled according to three policy dimensions according to the methodology developed by Dee, P. (2009), ‘Services Liberalization toward the ASEAN Economic Community’, in Corbett, J. and S. Umezaki (eds.), Deepening East Asian Economic Integration. ERIA Research Project Report 2008-1, pp.58-96. Jakarta: ERIA (for health services). Higher values of the index indicate higher levels of restrictiveness. 1 such in Indonesia out of over 200,000 Indonesian doctors.2 This 0.02% share of foreign doctors is dwarfed by the 16% share in Singapore and 7% in Malaysia (Figure 2), which have made the use of foreign doctors a cornerstone of their medical systems, particularly in urban hospitals. Thailand also has a very low share of foreign doctors but at the same time a more open medical education system. Figure 2: Indonesia is closed to foreign medical doctors unlike other countries in the region Country Foreign Doctors Total Share Foreign to Total (%) Indonesia 41 168,823 0.02 Malaysia 3,726 52,875 7.05 Thailand 247 55,164 0.45 Singapore 2,120 13,478 15.73 Source: Laporan Konsil Kedokteran Indonesia (KKI) 2015, Malaysian Medical Council Annual Report, Thailand medical council (http://tmc.or.th/statistics.php), and Singapore Medical Council annual report 2016. Notes: Data for Malaysia is calculated from number of licenses granted during 2000-2015. Openness and the quality of tertiary health services Increased openness to foreign investments and professionals could help improve the quality of the domestic health systems in Indonesia, particularly hospital services. First increased foreign presence could expand the range and quality of health services available in the country. Access to foreign providers, and the experience they offer of the same issues, accelerates the implementation of new practices and processes. As a result sections of the population could have access to treatments for which they previously had to seek healthcare abroad (mainly Singapore and Malaysia). This import substitution for more sophisticated treatments would bear also a direct economic benefit in that it may increase the amount of services provided in Indonesia with beneficial impacts on domestic employment as well. Second, the presence of foreign professionals and hospitals may have demonstration and competition effects vis-à-vis the domestic sector. The capacity of local staff can be increased through the training provided by foreign investors, who bring with them the technology in place in their institutions in their home economies. Local staff also could benefit from interaction with foreign practitioners working in Indonesia. Third, to the extent that foreign medical sector may be more efficient in providing health services than the public sector, the latter may try to use the former for reaching public sector objectives.3 If this can be done effectively, then an increased presence of the foreign private sector may help increase the efficiency of, and the access to health services as well (India is a good example of successful Public-Private Partnership in the hospital sector, whereby private tertiary hospitals allocate a share of their beds to treat public sector patients free of cost in exchange for subsidized inputs, such as land).4 2 In fact none of these 41 is actually practicing as a medical doctor as they are mostly invited for technological transfer purposes (providing training and education), rather than service provision. 3 The greater efficiency of most corporate hospitals compared to public hospitals stems by at least two factors: greater accountability and greater flexibility in the allocation of resources in the private sector. 4 See Calì, M., K. Ellis and D.W. te Velde (2008). “The contribution of services to development and the role of trade liberalisation and regulation”, ODI Working Paper 298. 2 Finally foreign investments can help to upgrade and expand the health services infrastructures in a world with tight budget constraints for the public sector, including in Indonesia. Moreover, investments are also needed beyond the metros to expand access to healthcare. 5 The same line of argument holds for health related infrastructure as well, in particular health training facilities. These positive impacts of openness on domestic tertiary health systems are consistent with the experiences of Singapore and Malaysia, which have used the increased presence of foreign medical professionals and hospitals to help build efficient domestic health systems and lure medical tourists from the region and beyond. This is in contrast with the experience of Indonesia which has restricted the entry particularly of foreign health professionals through a variety of regulatory barriers. The absence of qualified health professionals - along with explicit barriers to foreign investments - has also contributed to the limited presence of foreign hospitals, which typically rely on some key foreign personnel. High restrictions to the entry of foreign health professionals and to the establishment of foreign health institutions are associated with lower performance of the Indonesian hospital system relative to Singapore, Malaysia and Thailand. Lower restrictions in these 3 countries are associated with higher levels of capacity of the health system relative to Indonesia, for example according to the number of beds per 1000 people (Figure 3). As a result average waiting times are higher in Indonesia. Figure 3: Health Services Trade Restrictiveness Index and Hospital Capacity Hospital bed ratio and health services restrictiveness index 2,5 Singapore Hospital beds (per 1000 people) 2,0 Thailand Malaysia 1,5 Indonesia 1,0 0,5 0,0 0,0 0,1 0,2 0,3 0,4 0,5 0,6 Health services trade restrictiveness index Source: Data on hospital beds is retrieved from World Development Indicators (World Bank). Higher restrictions to the mobility of health professionals are associated with lower presence of skilled staff in domestic health services, in terms of density of physicians and nurses (Figure 4); in line with this, there is also a negative correlation between the level of restrictions to the entry of foreign health professionals with the share of births attended by qualified health staff across countries in the region (Figure 4). 5 However, extra bed capacity in the private sector does not directly benefit those patients who cannot access (due to distance and/or costs) treatment in those facilities. Again, a possible way to utilize these extra resources for public sector objectives may be through PPP. 3 Figure 4. Restrictions on movement of people and access to medical workers 2,0 Singapore 7,00 Singapore 102 Thailand Share of births attended by skilled staff Nurses & Midwifes per 1000 persons 1,8 100 6,00 1,6 98 5,00 Malaysia Physicians per 1000 1,4 Malaysia 96 Singapore Malaysia 1,2 94 4,00 Thailand (%) 1,0 92 Thailand 0,8 3,00 90 Indonesia Indonesia 0,6 2,00 88 Indonesia 0,4 86 1,00 0,2 84 0,0 0,00 82 -0,5 0,0 0,5 1,0 1,5 -0,50 0,00 0,50 1,00 1,50 -0,50 0,00 0,50 1,00 1,50 Movement of people Movement of people Movement of people Source: Data on physicians, medical workers (2010 for Indonesia, Malaysia and Thailand; 2011 for Singapore, and share of biths attended by skilled staff (2012) are retrieved from World Development Indicators (World Bank). Given these differences in performance it is not surprising that Malaysia and Singapore (and to a less extent Thailand) have been the main destinations of Indonesian medical tourists. In 2015, the number of healthcare travelers from Indonesia was around 600,000, spending around USD1.08 billion. In 2016, the largest contributor of medical tourists visiting Malaysia was Indonesia, followed by India and China. According to Singapore’s Ministry of Health and the Singapore Tourism Board (STB), 47.2% of foreign patients that visit Singapore come from Indonesia. Proposed trade policy changes to improve tertiary health services quality Our review suggests four trade policy changes that Indonesia could undertake to improve the quality of its tertiary health system. These changes aim to remove restrictions that have not yielded any clear benefits to the domestic system while have hindered the exposure of Indonesia’s health systems to international practices and competition: 1. Relax restrictions on the ability of foreign health professionals to offer health services in Indonesia in line with regional leaders, including by revising the requirement of language skills and the competence certification test conducted by Indonesian Doctor Council or Indonesian Health Practitioners Assembly. These technical restrictions greatly limit foreign health professionals’ opportunity to practice in Indonesia without ensuring the quality of the health service. There could be a transitional period for a foreign health professional before their mastering an excellent skill of Bahasa Indonesia. During the transition period, the language barrier can be overcome by the presence of Indonesian 4 mentee for the foreigner, which would also encourage the transfer of knowledge to local workers. In addition, the test may be used by the domestic health professional associations as a way to keep the possible competition of foreign professionals at bay. In fact this step may be simplified if Indonesia has a system for the recognition of certification standards between respective countries. 2. Relax restrictions to the hiring of foreign health professionals by hospitals including the need for a bilateral relationship with the origin country, the condition of lack of supply of such skills, the minimum class and age of hospitals, and the need to cover the foreign health professional’s living costs for two years These regulations raise great uncertainty to foreign health professionals. This is because, firstly, there is no clear definition of which kind of bilateral relationship meets the regulation. Secondly, there is no clear threshold to define the “lack of supply or resources” of a specific skill. Moreover, it is not clear which institution will decide whether this condition is met or not. Third, the objective for the user to prove its capability to cover the foreign health professionals’ living costs for two years unnecessarily breaches the discretion that typically regulates the employment arrangements between the user and the foreign health professionals. 3. Remove the restrictions on the scope of services for foreign hospitals including the need for a minimum number of beds and the types of services The regulation sets a high standard for foreign providers to develop a new hospital. The rationale behind the regulation is unclear, as Indonesia needs more investment in hospitals, especially in regions outside Java where the number of hospital services is still low. Instead, Indonesia should remove such limitations, in an attempt to encourage investments in new hospital development in rural regions and eventually promote better equity in access to hospital services. The high requirement may also add to operating costs that eventually elevate service prices. This contradicts the government vision of affordable universal health coverage for the whole population. Other proposed policy changes include longer-term revisions of existing laws (particularly Law No.44/2009): 4. Make licensing requirements for foreign hospitals more transparent by relaxing the requirement of the needs analysis There should be more detailed information related to this regulation, such as a clear threshold of each factor and also who will conduct the evaluation. If the government conducts the analysis then the private sector and also foreign providers should be allowed to complement the analysis. While the focus here is on trade policies, many other changes may be needed to reform the tertiary health system in Indonesia. The experience of other ASEAN countries, including Singapore and Malaysia, could be of help in this undertaking beyond trade policies. 5