Indonesia: Health care mega-spending

A drive to ensure universal health care provision by 2014 in the world’s fourth-most populous country necessarily entails large-scale investments, and is opening up opportunities for the private sector.

Indonesia is committing billions of dollars as it aims to meet the government’s pledge to provide universal health care for its 240m citizens by January 1, 2014. This investment, combined with the strong economic growth that is boosting Indonesians’ incomes, is leading to rapidly rising demand for health services, equipment and pharmaceuticals, as well as a need for more medical professionals. The country is rapidly becoming one of the world’s most-important health care markets, and international and domestic firms are increasingly benefitting as the market grows and opens up.

The establishment of universal coverage entails the creation of a Social Security Management Agency (BPJS), combining existing public insurance schemes and extending them to cover all Indonesians without health insurance. The BPJS will collect insurance premiums and pay health care bills, and is expected to start with an initial investment of Rp25trn ($2.59m).

It should be the world’s largest “single payer” of health care, a single payer being a body which purchases health care from a single insurance pool. The UK’s National Health Service (NHS) is currently the world’s biggest single payer. Other examples include the universal health care models in Canada and Australia.

The BPJS will take over schemes such as Jamkesmas, an insurance programme introduced in 2008 that covers more than 75m poorer Indonesians. The Jamkesmas scheme offers a broad safety net but not a great depth of coverage, with an annual budget of less than $10 per head, according to the international press. Currently, around 40% of the population is covered by insurance schemes catering for state employees and their dependents, as well as the poor.

Parallel to the expansion of insurance coverage, the government and private sector are working to increase the capacity of the sector. “Our estimates say the government will require about 150,000 hospital beds by 2014. That means increasing the number of beds by 30% in only two years, as the current number of beds in the country is approximately 110,000,” Jonathan Sudharta, the director of Mensa Group, told OBG.

Currently, the country has a ratio of six hospital beds per 10,000 people, compared to 18 in Malaysia and 21 in Thailand, according to the UN’s World Health Organisation (WHO).

Expanding health care will also entail a substantial increase in the number of health care professionals. Currently, the country lags behind regional norms for the number of doctors as a proportion of the population: Indonesia has three physicians per 10,000 people, while Malaysia has nine and India, six. There is both a shortage of medical graduates and the challenge of “brain drain”, whereby many of Indonesia’s best doctors and nurses move abroad to work, including to Malaysia, where wages are often higher and facilities better.

Grace Felita, the group global quality development director at Siloam, told OBG that more could be done to encourage public-private partnerships in the sector to support its development. She said she would like to see greater sharing of capacity and staff, such as public patients being treated in private hospitals when public units are over capacity.

Rising demand for health care, driven by the expansion of coverage, is good news for not only health care providers, but also the equipment manufacturers and pharmaceuticals firms that supply them. However, universal care will also put pressure on government resources and entail strategic thinking in how to make care more immediately available to those in rural areas.

The expansion of health care in Indonesia, through universal insurance and the necessary parallel development of hundreds of new hospitals and other facilities, is a very ambitious undertaking. Implementation over the coming years is will not be easy, and there are likely to be teething problems. But the opportunities for the private sector, increasingly willing and able to play its part, are considerable.