Indonesia’s private health sector has seen robust growth over the last decade, in alignment with the overall Indonesian economy. Indonesia’s economy hasperformed well and is expected to continue to grow at around 5 percent per year to 2020 (International Monetary Bank, 2017). Industries, including healthcare, have benefited from robust domestic demand. As the middle class has grown, demand for health services has also increased. With a growing and young population, social investments to generate a productive workforce can have multiplicative effects on economic growth.
Indonesia’s national health insurance scheme, JKN, supports the government’scommitment to ensuring a healthy population. Law 24 of 2011 established the national health insurance agency (BPJS-K), and JKN, rolled out in January 2014, covered approximately 75 percent of the population by April 2018. With the goal of covering 95 percent of the population by January 2019, JKN is rapidly increasing access to and demand for health services, especially for the poor and the near-poor (defined as the bottom 40 percent of the population by income).
The Government of Indonesia embarked on a comprehensive assessment ofJKN’s impact to assess the scheme’s achievements and areas that needstrengthening. Coordinated by the National Team for the Acceleration of Poverty Reduction (TNP2K) with support from the U.S. Agency for International Development (USAID)-funded Health Policy Plus project (HP+), this study assessed the scheme through four key perspectives: payer, patient, provider, and private sector. It aimed to understand thescheme’s value for money given other demands on government spending. The evidence generated should inform policymakers to refine, put in place, or remove policies so that the scheme can achieve universal coverage by 2019 while ensuring the scheme’s sustainabilityand improved access to healthcare for the population, especially the bottom 40 percent.
Responding to the growing healthcare needs of the population will require strong partnership between the government and the private health sector. BPJS- K has contracted with private hospitals and clinics since scheme initiation, and as of September 2017, 1,335 private hospitals (approximately 78 percent of private hospitals registered with the Ministry of Health) (Ministry of Health Database, N.D.) were offering health services through the scheme, making up 60 percent of all contracted hospitals (Idris, 2017). The Indonesian health system relies on private manufacturers and importers for essential drugs and medical devices. The significant increase in the population with ability to pay through a national health insurance scheme is a business opportunity. Prior to JKN, civil servants and formal sector employees had government-run insurance schemes that provided them access to health services through a limited set of private providers. JKN brought the poor and near-poor into the market, providing them with a benefit package equal to those previously only offered to the formal sector. The Government of Indonesia has invested heavily in JKN to improve health outcomes and provide financial protection for its citizens. Furthermore, it hoped the scheme would motivate health sector growth with additional employment opportunities and lead to a healthier workforce and a more productive economy. Various policies have been put in place to incentivize the private health sector market.
This report assesses whether the Government’s intentions are being fulfilled through its current policies. Are the health facility gaps being filled through the private sector, and is the presence of a large single-payer program crowding private investment? Has the monopsonistic nature of BPJS-K and the concentration of purchasing power negatively affected the health sector? To assess the impact of JKN on the private sector, HP+/TNP2K posed the following three key research questions:
- What has been the impact of JKN on providers?
- Are the reimbursement processes (rates, performance adjustments, mechanism)attractive and fair for providers?
- Has the total market for healthcare in Indonesia increased choice and competition due to JKN?
This report focuses primarily on how the total market for healthcare has shifted due to JKN. To answer the first two research questions, HP+/TNP2K conducted a private hospital survey. The survey captured changes in services from 2013 (pre-JKN initiation) to 2016 (post-JKN initiation), such as patient volume, services offered, and human resources. Furthermore, it illuminated the private hospital sector’s perspectives on how thereimbursement rates are influencing services provision. These insights are primarily captured in the Private Hospital Survey Report. Looking beyond the healthcare providers, the third research question focuses on how the total market has changed due to JKN, and whether that has increased choice and competition and has motivated improvement in healthcare quality, patient experience, and cost containment.
This study focused on the healthcare providers, pharmaceutical manufacturers, and medical device manufacturers. Understanding that the private health sector market is composed of a variety of players beyond these three, such as diagnostic service providers, importers and distributors, and medical training institutions, this assessment took a deeper look into subsectors that JKN directly impacts (i.e., directly paid by BPJS-K) and have direct impact on the financial sustainability of JKN (i.e., major cost drivers). Accordingly, private hospitals, pharmaceutical manufacturers, and medical devices manufacturers were the primary focus of this analysis, with supplemental insights into private health insurance.
The following chapters are organized by these three major private health subsectors. Each chapter starts with a rationale for the subsector’s analysis focus and summarizes the subsector and government or JKN regulations and systems that have an effect on the subsector players. We then analyze whether the incentives placed by JKN and its policies are appropriately directing the private markets toward the intended effects. We conclude each chapter with a set of policy recommendations that can further incentivizeprivate sector investments into health to achieve JKN’s policy objective of improved access tohigh-quality healthcare, especially for the poor and near-poor. The conclusion summarizes the trends seen across the private health sector as a whole, incorporating learning fromSouth Korea and Canada’s single-payer programs to draw out insights that could informimprovements to Indonesia’s system, and recommends policy changes that could ensure a robust private health sector remains to partner with the Government of Indonesia to grow and expand access to care.