In recent times, increased life expectancy and reduced infant mortality rates signal vital, important advances in Indonesia’s health care system. Yet these are often offset by the country’s high rates of maternal mortality and child malnutrition. For the 2010-14 period, the government has given health services a series of priorities: improving maternal and child health, continuing to develop universal coverage, assigning health care practitioners to underserved regions, making pharmaceuticals safe and affordable, and working to control communicable and non-communicable diseases.

DECENTRALISATION: Since 2000, a policy of decentralisation has been in place, involving the devolution of responsibility for many health programmes from the central to local governments. The rationale behind this move is that local governments are better situated to deliver services to a geographically fragmented country, spread over many islands, some of which are remote. However, results so far have been mixed. Some key measures of health have declined, with 46% of the total population receiving immunisations in 2007, compared with almost 55% in 1997. On the other hand, the maternal death rate was halved during the same period to 228 per 1000 live births, although it remains alarmingly high in comparison to other developing countries in the region. Such relatively poor preventive health efforts are consistent with the low proportion of GDP spent on health care in Indonesia. Creating and maintaining a public health care system that can deliver high-quality services to even the poorest and most remote households will be necessary to reduce high rates of maternal and child mortality.

As the population continues to grow and some segments become more affluent, lifestyle-related illnesses are expected to become more prevalent. Just as Indonesia urgently needs to overcome developingeconomy infectious illnesses (such as malaria, childhood diarrhoea, tuberculosis and dengue fever) the incidence of chronic, non-communicable, developed-economy diseases such as strokes, cancer and heart disease is simultaneously rising. HIV/AIDS is also an area for growing concern in Indonesia, even though its prevalence is relatively low, with estimates of infection rates varying between 0.5% and 2%.

El-Mostafa Benlamlih, resident coordinator of UN Indonesia, told OBG, “Indonesia is a huge and culturally diverse country. You cannot address these issues in a centralised way. Indonesia is doing the right thing by being decentralised, but more leeway is needed to organise the right way to reach people, such as working with non-governmental organisations strategically, capacity building, listening to the needs of people, and promoting innovation.” To ensure decentralisation, Benlamlih thinks it is necessary to keep reinforcing the actors at the local levels, e.g. the district and provincial authorities. “If these relationships are defined in a better way, people will become more innovative and take more risk. Clarity in responsibilities is important,” he said.

MANY PEOPLE, MANY NEEDS: With around 240m people, Indonesia is the world’s fourth-most-populous country. With such a large population, funding health care is a challenge. Added to this, the percentage of the population living below the national poverty line was 13.3% in 2010, according to the World Bank’s World Development Indicators (WDI). Indonesia’s health investment levels are among the lowest in the region.

According to the latest available figures from the WDI, health care spending per capita in 2009 was $55.

This compares with Vietnam at $80, Malaysia at $336 and Singapore at $1501. Spending as a percentage of GDP was 2.4% in 2009, compared with 7.2% in Vietnam, 4.8% in Malaysia and 3.9% in Singapore.

PROVIDING UNIVERSAL CARE: In 2004, the government pledged to provide all citizens with universal health insurance, with the Ministry of Health (MoH) aiming to implement a standard coverage scheme that will provide a health care safety net for all Indonesians by 2014. Based on the National Social Insurance System Law, the programme has already covered approximately 76m poor and near-poor citizens. The plan is based on a two-pronged strategy: making basic hospital medical services available nationwide via increased governmental spending, and encouraging the private sector to invest in health infrastructure. Regionally, universal health care coverage is already available in Singapore and Thailand, with plans reportedly under way in the Philippines to develop its own system.

This bold move – by one of the world’s most populous countries, no less – carries the imperative for the country to reform health care delivery, particularly of preventive care, as well as to balance its fiscal systems to achieve a sustainable system. Previous governmentled health insurance plans have experienced problems related to a scarcity of puskesmas, or health centres, as well as complaints about treatment quality and large out-of-pocket payments. Infrastructure development, as well as balancing costs with health delivery, will be essential in delivering on the promise of universal health care. The universal scheme may also boost the country’s overall industry revenues, according to Vidjongtius, the director of Kalbe Farma. “Over the course of the next 2 years we expect the industry to sustainably grow at a 10%,” he said. “Though our own simulations reflect that, should a universal health care system be put in place, the growth rate could easily reach 18-20%.”

INSURANCE: Insurance programmes include Akses, which provides health insurance to government employees; Asabri for military personnel; Jamsostek, the stateowned provider of both pensions and health, life and accident insurance for workers in the private sector; and Jamkesmas, the health care insurance programme. Jamkesmas, introduced in 2008, was an extension of the previous plan, known as Askeskin, established under the National Social Security System Law of 2004. Coverage of these programmes has been limited – the government claims Jamkesmas covers 38% of the population – and they have also been subject to allegations of corruption and mismanagement. To meet the need for universal coverage by 2014, MoH funding was increased by 10% in 2011 to $3bn. However, this sum falls short levels needed to meet goals, with many calling for an additional $1.15bn per year to ensure all Indonesians receive free hospital treatment.

STAKEHOLDERS & INVESTORS: Many in the sector expect the creation of a universal health system to be a protracted process. Patrick Ng, the managing director of pharmaceuticals firm GlaxoSmithKline Indonesia, told OBG that, although the MoH is pushing for social reform in health care, it faces the challenge of aligning different stakeholder views, making the 2014 deadline difficult to meet. However, even when blanket health coverage exists, Ng expects the private sector will have room for growth, due primarily to an expanding middle class and its rising purchasing power.

In 2010, the government opened the health care sector to foreign investment, encouraging private hospital builders to reserve space in their facilities for its universal health programme. The MoH has also encouraged the private sector to build hospitals, while at the same time urging them to designate between 25% and 50% of beds as class three, which denotes the basic level of health service in the country. According to the MoH, there are 1523 public and private hospitals nationwide, with 151,000 beds in all. Some 45,000 of the 64,441 class-three beds were in public hospitals. So far, Indonesia’s Mayapada Group and property firm Lippo Karawaci have both signalled an interest in building hospitals, but regional firms have not yet indicated they will follow suit. In terms of the pharmaceuticals industry, “The potential growth will come from over-thecounter [medicines] in the coming years,” Ng told OBG. “In addition, the pattern is that local branded generics will replace branded medicines as they are cheaper and more affordable for the population.”

The issue of affordability is a contentious one for both representatives of the pharmaceuticals industry as well as consumers. Many believe that high taxes on some imported pharmaceuticals, combined with operating restrictions on foreign companies, are driving up costs and reducing competition (see analysis).

DOCTORS: Improving health services means more than just injections of cash, according to Luthfi Mardiansyah, the president director of leading pharmaceuticals firm Novartis Indonesia. Mardiansyah told OBG the government must also ensure it makes provisions for the required number and quality of medical professionals – as well as the necessary infrastructure – to create a functional national health scheme. The situation is made difficult by laws prohibiting foreign doctors to practise in anything other than a consulting capacity. “A reform of the health care system is needed,” Mardiansyah told OBG. “The number of doctors is clearly not sufficient in the country, not to mention specialists. The distribution of doctors is also inequitable.”

RURAL NEEDS: To address this issue, the government is planning to bring back a financial incentive plan from 2009 designed to encourage doctors to relocate to more remote areas. In April 2011, the minister of health, Endang Rahayu Sedyaningsih, told local press legislation was in the pipeline to help achieve this. A large majority of Indonesia’s doctors are based in Java, and 24% work in Jakarta, according to a study by the Indonesian Doctors’ Association. Furthermore, many medical facilities suffer from understaffing, with the Indonesian Doctors’ Association study finding that less than 5% of doctors worked outside Java, leaving many community health centres operated only by nurses. While the government has moved to increase the number of doctors in remote areas, this will only partially redress imbalances. An incentive programme includes paying doctors $600 a month to serve in remote districts, rather than the current $345, but it unclear whether a simple pay raise will entice professionals to move. With so many opportunities Indonesia’s health care sector is primed for increasing foreign investment. However, to ensure the domestic market is not left out, the government has set up regulatory requirements for foreign companies, making it difficult for them to function with full and complete autonomy (see analysis).

OBSTACLES: Revising the requirement that foreign pharmaceuticals companies have both a local partner and a local manufacturing base could help to strengthen the sector and boost investment. Another big step forward would be to allow foreign doctors to practise freely and to provide them with financial incentives to set up shop, which would lead to both skills and technology transfer from foreign to local medical professionals. Regulatory regimes, immigration schemes and production costs are just some of the many issues affecting the sector, however. There remains a need for the government to address a variety of other obstacles to the delivery of better-quality health services, including improving medical staff training and boosting efforts to raise health awareness.

OUTLOOK: A more relaxed approach to foreign investment and ownership requirements, paired with a more liberal approach to both attracting foreign medical talent and infrastructure investment, would serve medical consumers better and allow the sector to bring in supporting framework. While decentralisation is likely to continue going forward, better communication and definition of local roles are vital for it to succeed.

In the future, as Indonesia’s population ages, it will likely demand better health services. The planned universal health care system will provide this for the poor and disadvantaged, while segments that can afford it will continue to pursue private health care alternatives until quality of care reaches developed-world levels.