The year 2015 marks the second year of the rollout of universal health care (UHC), known as JKN locally, in Indonesia. The plan saw a challenging launch in 2014, but administrators and lawmakers are maintaining the target of full implementation by 2019, when 240m260m Indonesians will be eligible for coverage under the plan. In many ways, the implementation of JKN is driving the rest of the country’s health sector, as a new model of supply and demand emerges. As more people seek health care because they have coverage, more hospitals are needed, as are more medical staff.
The pharmaceuticals industry is also gearing up for more demand, especially of generics, which the government prefers as a cost-saving mechanism (see analysis). Laboratory equipment suppliers, private insurers, and even the health care sectors in neighbouring Malaysia and Singapore – to which many Indonesians have historically travelled for care – are also being affected in some way by the implementation of JKN.
Overly Optimistic
However, sector analysts from the Gadjah Mada University Centre for Health Service Management and the Paramadina Graduate School of Diplomacy have predicted that Indonesia risks overshooting the 2019 deadline for achieving UHC. One study has estimated that only seven provinces out of a total of 33 would have full UHC by 2019.
Analysts blame regulation disparities, poor health care infrastructure and an urban-rural gap in the number of medical staff attending to each region for the potential failure to meet the 2019 deadline. Newborns, orphans, unregistered low-income citizens and prisoners are not automatically covered by the programme, and although the majority of doctors practice in urban areas, only about half of the population are urban residents. Furthermore, inadequate funding for health care presents another potential stumbling block to providing UHC for every citizen.
Funding Shortfalls
The World Health Organisation (WHO) found that spending on health care totalled 3% of Indonesia’s GDP in 2013, compared to the world average of 10.1% in 2012. This makes Indonesia’s total expenditure for health care among the lowest in the world: India spends 3.9%, the Philippines spends 4.1%, and South Africa and Brazil both spend 8%. Furthermore, government spending only covers 39% of that 3%, leaving citizens and the private sector to finance the remainder. The shortfall in spending is one of the main reasons many analysts doubt that the implementation of UHC will be achieved by 2019.
Implemented via Presidential Regulation No. 111 in 2013, JKN superseded and expanded the previous health care system, under which only those classified as poor were covered by governmental health insurance. The new regulation required most of the country’s employers to enrol their employees by January 1, 2015 and to pay a premium of 5% of each employee’s salary to the Social Security Organising Agency (BPJS Kesehatan), which manages the JKN programme. This 5% payment system is combined with two other funding streams. The government, via the national budget, pays for the poor, while the self-employed and workers in the informal sector pay a monthly premium of Rp25,500-59,500 ($2.10-4.90) to finance the programme.
The government apportioned approximately Rp20trn ($1.7bn) to cover premiums for the poor in 2014, equalling about Rp19,225 ($1.6) per person per month. However, analysts argue that this is not enough to provide decent coverage to all the Indonesians who need it. Hasbullah Thabrany, a professor of health policy at the University of Indonesia and an architect of the JKN programme, told the Establishment Post that in order to offer health services of a good quality, the government would have to double its subsidy for the poor to at least Rp40,000 ($3.3) per person per month.
Indeed, in 2015 BPJS Kesehatan is expected to require additional financial aid of at least Rp6trn ($496m). BPJS said the extra expenditure was needed to fund the unexpectedly high take-up of the programme, which saw claim ratios exceed 100% by December 2014. The high ratio meant that funds from premiums collected by BPJS were not adequate to pay the service bills, a problem that has been attributed to selective and inconsistent payment of premiums. To address this, the government announced in February 2015 that it would implement a one-month delay on activation of JKN coverage to discourage people from only registering and paying into the system when they fall ill.
According to World Bank estimates, JKN will cost between $13bn and $16bn per year when full implementation is reached in 2019. It will be the largest single-payer, universal health system in the world.
The government and administrators have taken a flexible stance in dealing with the challenges arising from JKN, with the claims ratio issue a good example of this. Yet, this strategy has sometimes been seen as confusing, with some detractors of the programme claiming that government communication about JKN has been slow to arrive and light on the details about what is covered and how to access that coverage.
Criticism
Many have complained that the system is not yet ready to accommodate the 131m people who are entitled to coverage, as many already experience long waiting times and scarce public hospital beds. In practice, this has meant that some people have had to pay twice to access treatment, as paying for private care is sometimes the only option.
For this reason, some employers have requested that the implementation of JKN be delayed until the government addresses quality and capacity issues. Despite such criticism, President Joko Widodo has gone ahead with the implementation of JKN, beginning distribution in November 2014 of the Indonesia Health Card to more than 88m people living below the poverty line – an estimated 40-60% of Indonesians.
Decentralised Care
More than 9500 community health clinics, or puskesmas, deliver basic primary health care to all Indonesians. Each puskesmas serves a locality of about 25,000-30,000 people and is required to have at least one physician on staff.
When they were initially established, puskesmas were envisioned as gatekeepers for admission to public hospitals and private clinics, providing referrals when necessary. However, this process is not always followed in practice, and patients can and do proceed directly to hospitals and clinics to obtain services without a referral from a puskesmas – which is one reason why these institutions are often overcrowded.
One issue facing every sector in Indonesia is how to reach a population that is dispersed over 6000 inhabited islands. This is especially important when it comes to health care services. To extend the provision of health services to rural and remote areas, the government has been upgrading puskesmas with inpatient facilities, particularly in rural locations and smaller towns. Inpatient services are currently provided by about onethird of all puskesmas, and budget allocations have been made to expand that number further.
With the country’s relatively high maternal mortality rate (MMR) of 300-400 maternal deaths per 100,000 live births, a special focus has been made to upgrade facilities to deal with maternal emergencies. In addition to these measures to upgrade rural care, the Ministry of Health’s (MoH) Pegawai Tidak Tetap policy encourages doctors and midwives to apply for positions located away from urban areas by offering briefer contracts and above-average compensation for those who choose to be posted in rural and remote areas.
Development Goals
As the 2015 deadline looms for achieving the UN Millennium Development Goals (MDGs) to reduce poverty, Indonesia’s record is a mixed bag. Despite concerted efforts, the country will likely fall short on three of the eight targets: increasing access to clean water and basic sanitation, reducing MMR during delivery, and reducing the prevalence of HIV, according to WHO. In addition, the incidence of tuberculosis, although slowly falling from 189 per 100,000 people in 2010 to 183 per 100,000 in 2013, is still alarmingly high compared to Malaysia’s 88 and 99, respectively.
Problems of Access
The challenge of extending quality health care to all Indonesia’s inhabited islands is substantial. Much of the blame for the shortfall in achieving all the MDGs and the relatively high tuberculosis rates falls on a lack of infrastructure and transportation in remote areas. Rural poverty is rife in the country’s remote eastern islands, which also have some of the country’s highest rates of disease. Yet, the government holds that it is imperative that health care reach all the population, no matter where they live, and so has devised innovative ways to do so.
A case in point is the distribution of vaccines, which must be maintained at a certain temperature. Refrigerated trucks to deliver and distribute vaccines are not always able to navigate the poor roads leading to remote villages, so delivery by helicopter is sometimes the only option – but it can come at a high price.
Just how high a price and how much still needs to be done was indicated by the health minister, Nila Moeloek, in February 2015, who requested a budget allocation of Rp654bn ($54.1m) to bring 6000 puskesmas up to the regulatory standards required by the MoH.
As noted, these clinics provide first-line care for patients around the country and require many upgrades to cut down on long lines and waiting times. One such upgrade was made to Jakarta-area puskesmas in June 2014, when a pilot project for an online referral system for further care at nearby public and private hospitals was tested and deemed a success. Puskesmas nationwide were thus encouraged to adopt the system.
Building Boom
In addition to upgrading the country’s puskesmas, the health minister has proposed constructing 14 new national referral hospitals and 184 regional referral hospitals by 2019 to meet the demand that hospitals all around the country are experiencing. Some of this demand is a consequence of the popularity of JKN, but other components include a growing middle class that prefers to be treated at home rather than travelling to Malaysia or Singapore, as well as a national disease profile transitioning from mainly infectious to non-communicable diseases (NCDs), such as cardiovascular disease and diabetes. These days, more Indonesians are dying of NCDs than communicable diseases – 71% of all deaths in 2014.
Hospitals
Prevention is always the best strategy when dealing with NCDs, but until recently that has not been the main thrust of public health campaigns. Hospitals and clinics therefore must be equipped to treat those suffering from NCDs of all kinds. Specialised equipment – and physicians – are needed to treat this cohort of patients. Helping matters somewhat is that plans to build many hospitals, both public and private, are being drawn up to meet the surging demand. About 62% of Indonesia’s 2200 hospitals are private, and around 45% of hospital beds are located in private hospitals. The country also has about 376 tertiary hospitals, 300 of which are public. In all, the World Bank estimates the country has 270,000 hospital beds, which means it has a bed-to-population ratio of 1.1 per 1000 people. The global benchmark is 3:1000.
This shortfall represents an investment opportunity, especially as, with JKN coming online, the demand for public and private beds is surging. “The introduction of telemedicine to reach rural areas is essential in Indonesia and a great opportunity for investment,” Romeo Fernandez Lleda, president-director of Siloam Hospitals, told OBG. “There are about 0.3 doctors for every 1000 Indonesians, which is quite low compared to the world average of 1.4, and they are predominantly located in major cities,” he added.
Health Investment
Local Indonesian companies have started consolidating and investing in the hospital business. Siloam Hospitals is one operator that has spotted the opportunity in its back yard. With 18 hospitals in 13 cities, Siloam is the country’s largest operator of private hospitals. Backed by its parent company, the property development company Lippo Karawaci, it has launched an aggressive short-term growth strategy that includes building 22 more hospitals and reaching a capacity of 10,000 beds by 2017. For 2015 Siloam has allocated $140m for capital expenditure to build 10 hospitals and acquire medical equipment.
Another example is the purchase by PT Kalbe Farma, Indonesia’s largest listed pharmaceutical company, of Mitra Keluarga, one of the country’s largest hospital groups. The result was PT Mitra Keluarga Karyasehat, a hospital owner and operator group. The group raised Rp4.5trn ($372m) in its initial public offering (IPO) of shares in March 2015, making it one of Indonesia’s largest IPOs in recent years. PT Mitra Keluarga Karyasehat plans to expand its 11 hospitals, located in the Jakarta area, Surabaya and Tegal, to 18 within five years.
A somewhat atypical entrant into the hospital business is the state-run coal-mining firm Bukit Asam. In 2014 Bukit Asam’s investment subsidiary formed a new firm, Bukit Asam Medika, to operate a hospital and health clinics in the company’s mining concession in South Sumatra. The hospital, which serves around 8000 Bukit Asam employees and contractors, will now be open to the public as well.
The foreign players operating in Indonesia’s health care sector include Ramsay Sime Darby Health Care, a joint venture between Sime Darby and Ramsay Health Care. The company has its eye on expanding into the health care sector across Asia. It currently operates hospitals in Malaysia and Indonesia, where it has three hospitals – RS Premier Jantinegara, RS Premier Bintaro and RS Premier Surabaya.
No Longer Nil
Foreign investment in some industry sectors is restricted or partially restricted in line with the Negative Investment List (NIL). The NIL stipulates specific investment conditions such as the maximum percentage of foreign ownership allowed and the number of expatriates that can be employed in any sector on the NIL. In April 2014 the list was revised. The main beneficiaries in the health care and pharmaceuticals sectors were investors from ASEAN countries, but all investors in specialised hospital services, medical and dental clinics, and nursing treatment services generally were given a greater degree of flexibility with regard to investment limits.
For specialist and sub-specialist hospital services, foreign ownership limits were raised to 70% for such facilities in eastern Indonesia (except Makassar and Manado) for ASEAN investors. They remained at 67% for the rest of the country and for all other investors. In addition, the requirement that such facilities have at least 200 beds was rescinded. Specialist nursing services saw much the same changes. Foreign ownership remained limited to 49% for all non-ASEAN investors in all regions. But for ASEAN investors, the limits were raised to 70% for investments in eastern Indonesia and 51% for investments in Makassar and Manado.
The biggest overall change was to the foreign ownership limits to investments in the manufacture of pharmaceuticals, which were raised from 75% to 85% across the board. Industry analysts generally anticipate a positive outlook for the country’s pharmaceuticals industry, with Frost & Sullivan naming Indonesia “the most promising emerging market for pharma” in 2015 and estimating that the country will spend about 19% of its total health expenditure on pharmaceuticals post-JKN implementation (see analysis).
However, investors in the pharmaceuticals industry who want to participate in the JKN programme have a few hurdles to overcome. The JKN programme relies heavily on an e-catalogue for the medicines listed in its formulary. This catalogue is administered by the Government Agency of Procurement Policy, which procures the medicines listed in the e-catalogue. The procurement process is conducted via auction. Suppliers wishing to participate in the auction must be willing to sell large quantities of their pharmaceutical products at lower-than-market prices in order to be listed in the formulary. The MoH takes responsibility for determining the base prices of the medicines, which are then matched with the prices determined at auction.
Home Advantage
With some of the country’s basic health care needs not yet met, Indonesia may not be the first destination to jump to mind when it comes to medical tourism. However, according to one industry insider, it is an area primed for development. Already one of the most popular tourism destinations in Indonesia, Bali could leverage its laid-back approach to life – and many spa and wellness centres – into creating aftercare centres for those recuperating from surgery or other medical interventions.
Fitriana Dosun, head of marketing at Bali Indonesia Medika Citra Siloam Hospitals Group Bali, believes that medical tourism itself is also a possibility for Bali. She told industry group TTG Asia in January 2014 that the group’s hospital in Nusa Dua regularly receives requests for information from international markets. These come mostly from nearby Australia, where high medical costs and long waiting periods are creating a market for more affordable and quicker treatments overseas. For its part, the Nusa Dua hospital is hoping to win over the trust of potential Australian patients with the hospital’s accreditation by the Australian Council on Health Care Standards, along with a full surgical theatre equipped to Australian standards.
Outlook
The growing pains experienced by those using and administering health care in Indonesia can be read as signposts on the road from low- to middleincome status. Any country making this transition will encounter such signs, whether they announce gaps in funding for UHC, the search for new ways to deliver care to rural areas, how to prevent NCDs, or the building of more hospitals to meet demand. Having made universal health care a top priority, the government is determined to overcome these challenges. Although there are bumps on the way, few would say the journey is not worth it, least of all those who need it most.
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