Private sector investment in Indonesia's health care

The health care sector in Indonesia is in the midst of change, with the government making a final push to cement the rollout of universal health care (UHC) against the backdrop of the global Covid-19 pandemic. The plan had initially aimed to bring the population of over 268m under coverage by the end of 2019, but it had yet to achieve targeted levels of funding and coverage as of early 2020. While the health system is currently tackling multiple burdens, it is limited by comparatively low government spending, rising labour costs and insufficient infrastructure. However, the move towards UHC, alongside activity in the private sector, is triggering impressive growth in spite of these challenges.

Indicators & Disease Burden

Indonesia’s health indicators are generally improving due to better living conditions and increased access to health services – which can be a challenge in an archipelago spread across over 17,000 islands – with life expectancy at birth increasing from 62.3 in 1990 to 71.5 in 2018. However, these gains have been partly offset by a growing burden of non-communicable diseases (NCDs) and rising risk factors such as high blood pressure, high cholesterol, obesity and smoking. Data from National Basic Health Research in 2018 showed that the prevalence of smoking nationally was 24.3%, with high blood pressure affecting 34.1% of the population, and 35.4% classified as obese.

Shifts in technology, lifestyles and the environment have transformed the pattern of disease in Indonesia, with 73% of all deaths now caused by NCDs. The most common diseases include stroke, cancer, heart disease, diabetes, chronic lung disease and liver disease. The MoH is responding to this changing burden of care through the Healthy Indonesia programme, promoting the importance of regular exercise, healthy eating and the avoidance of risk factors, as well as sufficient rest and stress management. Rina Agustina, head of the Human Nutrition Research Centre at the University of Indonesia, who led a group of researchers on a comprehensive study of the implementation of the national health insurance programme in 2018, has publicly called for a shift towards a health care system that places more emphasis on preventive care. The study ultimately resulted in the creation of a roadmap for a national health insurance programme that includes initiatives to promote healthier lifestyles by 2024. By prioritising preventive care, Indonesia could make considerable long-term savings on curative costs by reducing the risk factors associated with NCDs.

Communicable Diseases

NCDs couple with outbreaks of communicable diseases to strain the health care system. Indonesia has long battled HIV/ AIDS and other highly transmissible communicable diseases. There were an estimated 641,675 people living with HIV in Indonesia in 2018 and 46,372 new infections that year. UNAIDS statistics indicate that in 2018 only 11.4% of Indonesians aged 15 to 24 could correctly identify how to prevent the sexual transmission of HIV. Although there are no formal provisions within schools for sex education, the Ministry of Health (MoH) is one of a number of institutions working with the US Agency for International Development, UNICEF and the World Health Organisation (WHO) to improve awareness of prevention techniques and to widen access to treatment.

Indonesia is also one of nine malaria-endemic countries in South-east Asia, accounting for 21% of the region’s cases and 16% of deaths. However, by 2018 a total of 285 districts in Indonesia had successfully achieved their target of eliminating the disease, placing the country on track to reach its 2015-19 national development goal of malaria elimination. Dengue fever, meanwhile, spread particularly rapidly between March and April 2020, when deaths from the disease jumped from 94 to 254, and cases from 14,716 to 39,876, per MoH data.

Covid-19

Early 2020 also brought Covid-19 to the country and many others around the world, leading the WHO to say that Indonesia must do more to combat the virus through improved surveillance and case detection. It was not until March 2020 that the country reported its first case; however, by early May there were over 12,000 cases – the second-highest rate in South-east Asia. Indonesia responded by testing over 72,300 people by May 1; setting up a national task force to disseminate information and raise preventive care awareness; and instituting international and regional travel bans. Furthermore, social-distancing restrictions have been put in place and the 2020 budget was expanded to combat the negative effects on both public health and the economy (see Economy chapter). This saw an additional Rp75trn ($5.3bn) channelled towards the health care sector.

There is wide consensus that maintaining control of the virus requires rapid, extensive and effective testing, and the private sector in Indonesia is playing a crucial role in these efforts. Siloam Hospitals, for example, which is the largest hospital chain in the country and a leading contributor to medical research, has been administering and donating test kits. Other players are also utilising their capacity in the fight against the virus. The challenges faced by the Covid-19 pandemic are compounded by the growing prevalence of NCDs, as many citizens with underlying health conditions – notably hypertension, heart disease and diabetes – have greater difficulty fighting the virus.

Structure & Oversight

The health system in Indonesia has both public and private components. The public health system is decentralised, with responsibilities dispersed between central, provincial and district levels of government. The MoH, headed by Terawan Agus Putranto since October 2019, leads the central government’s arm, providing strategic direction and standards setting; regulating the sector; ensuring the availability of human resources; and managing specialist hospitals. Provincial governments provide technical oversight of provincial hospitals and district health services, and also manage cross-district health issues. District and municipal governments are responsible for managing both city hospitals and the district public health network of community primary health centres called puskesmas. Puskesmas are important in the context of the UHC rollout, acting as the first point of call for public health efforts through their focus on prevention and health promotion at the primary level, particularly in administering childhood vaccinations. Most care for low-income patients occurs at this level, as those under the UHC scheme are unable to access health care elsewhere without a referral letter or unless it is an emergency.

Move to UHC

Indonesia has a hierarchy of interrelated long-term, medium-term and annual plans across the central, provincial and district level. The core structural policies guiding the sector consist of the National Long-Term Development Plan 2005-25 and the National Medium-Term Development Plan 2020-24. These act as overarching frameworks steering development, calling for improvements in maternal and child health, disease-control efforts, access and quality of primary care, UHC coverage and the responsiveness of the health system.

The move towards comprehensive UHC, the goal of which is to ensure that every Indonesian can receive affordable and quality health care, is within sight and will fundamentally change both the public and private health care sectors. The national insurance programme (JKN), launched in January 2014, primarily relies on public sector providers, but also includes selected private providers that have opted to join the scheme. The scheme is supervised by the Social Insurance Administration Organisation (BPJS) and covers 222.8m Indonesians, or about 83% of the population; however, more work is needed to expand this to the entire population.

There have been some challenges for both participants and service providers in adapting to the new system, which constitutes the world’s largest public health insurance programme. Obstacles to date have included a lack of health providers and a financial deficit caused by insufficient premium payments, as well as by higher-than-anticipated spending on the treatment of chronic diseases. Additional administrative hurdles experienced by hospitals have included reported late payments from the BPJS, while the BPJS has identified alleged cases of overstated insurance claims by hospitals with poor accountability. In response, the BPJS temporarily stopped coverage of some treatments. Presidential Regulation No. 82 of 2018 now stipulates under Article 52 which services are not covered by the BPJS, including injuries due to work-related or traffic accidents. “The JKN system still has some issues that need to be sorted out. While it has not yet been thoroughly implemented, it is having a significant impact on the availability of health care services across all of Indonesia,” Cynderella Galimpin, general manager of pharmaceutical firm Boehringer Ingelheim Indonesia, told OBG.

Financing Public Health

The public health sector is financed through a tax-based budgeting system. Before the Covid-19 pandemic necessitated additional funding in early 2020, government expenditure on health care totalled Rp121.9trn ($8.6bn) in 2019, or about 5% of the budget. However, this amount remains insufficient to cover the needs of the JKN, and makes Indonesia – despite having the largest population and GDP in ASEAN – fall short when compared to other member countries. Nonetheless, expenditure has increased each year as the total budget has increased, and should continue to grow to fill gaps in the programme.

Achieving UHC comes at a cost, and the current rollout is limited by a growing deficit due to insufficient funding and premium collection. The scheme has faced financial issues since 2014, with claims far exceeding the premium it collected; the BPJS recorded a Rp15.5trn ($1.1bn) cash deficit at the end of 2019. There is a high proportion of low-income earners in Indonesia paying low premium and, as such, the cost of care often exceeds the value of paid premium. In September 2019 the government injected Rp4.9trn ($345.5m) into the scheme in an effort to rebalance spending and receipts.

On January 1, 2020 premium were raised for all participants in the scheme. The lowest-cost package increased by 64% to Rp42,000 ($2.96) per month, while the cost for second-class service doubled to Rp110,000 ($7.76), and the premium for first-class service was raised by more than 100% to Rp160,000 ($11.28). However, the government’s efforts to address the funding shortfall through higher premium experienced a setback in March 2020, when the Supreme Court annulled the increases, stating that they contradicted the provisions of Law No. 36 of 2009 on health. The end of 2019 also saw the government cleanse its health care data after finding 27.4m problematic pieces of data, including erroneously entered identification numbers. This should make operations more efficient.

Private Care

Despite the move to UHC, Indonesia’s health care infrastructure continues to be dominated by private players: data from 2017 shows that of the 2776 hospitals in Indonesia, 1767 were private. Private hospitals and clinics continue to attract higher-income patients and are likely to see benefits from the country’s expanding middle class; as public facilities are challenged by long queues and insufficient human resources, more patients are electing to seek care from private providers.

Faced with widening funding deficits in the JKN and a shortage of hospitals in underserved areas, the government is increasingly relying on private providers to collaborate in providing universal service to Indonesians. The minister of health told the Indonesian Chamber of Commerce and Industry that he welcomes a greater role for the private sector in health care provision, promising to reduce barriers for players seeking to establish more private hospitals, and urging closer partnership between the private sector and the government in care provision. The government has also created a coordination of benefits scheme that allows patients to supplement their coverage under the JKN with private health insurance as a top-up, taking some pressure off the public health care system.

Innovative Solutions

At the same time as Indonesia is developing the infrastructure needed to support a more equitable distribution of services, the country is turning to mobile applications and other innovative, technology-based solutions to fill the gap – a trend that has accelerated amid the Covid-19 pandemic. In February 2019 the MoH launched the health information application Sehatpedia, which enables patients to have an interactive consultation through a live chat with health care professionals, and provides access to health articles and policies. The Aido Health app from Siloam Hospitals operates in an similar way, while Halodoc is a service that facilitates the shipment of drug orders via a one-hour delivery option from the nearest participating pharmacy after a consultation. The MoH has partnered with such providers in order to efficiently serve the needs of the population during the pandemic as people across the country stay at home and practise social distancing.

While telemedicine and mobile health apps are still contending with an uneven distribution of internet connectivity (see ICT chapter), their potential is clear. “Medical technology has the ability to rapidly impact the state of Indonesian health care,” Caroline Riady, CEO of Siloam Hospitals Group, told OBG.

Staffing Shortages

One of the biggest persisting challenges facing Indonesia’s health sector is the shortage of doctors, nurses and other medical professionals needed to fill the growing number of hospitals and clinics. With demand for care expected to increase under the expansion of UHC, the shortage of health care professionals is an obstacle to effective implementation.

According to the MoH, in 2018 the health sector comprised around 1.2m qualified professionals, including approximately 354,218 nurses, 296,320 health support workers and 110,040 medical professionals. Most of these health professionals were concentrated on the island of Java near large cities such as Jakarta, which have the highest number of doctors and the highest ratio of doctors to population. Data from the Indonesia Medical Council database, which registers physicians in each province, shows that only three out of Indonesia’s 33 provinces have the WHO-recommended ratio of one doctor for every 1000 people, signalling persistent geographic disparities.

In response, the government has reformed its accreditation programme for health professionals and standardised the processes for certification. Compulsory service for medical specialists was established by Presidential Regulation No. 4 of 2017, with the government imposing mandatory work provisions for health workers who fulfil academic qualifications in special areas of Indonesia. This programme seeks to improve access and meet community needs for health services by ensuring a more equal distribution of medical specialists throughout the country, targeting outlying regions where people have JKN coverage but limited or no access to medical professionals. Standardising the certification progress should also help to increase trust in the quality of care.

Infrastructure

At the same time, the country continues to face a shortage of hospitals and beds, posing a further challenge to the realisation of effective and accessible UHC. As of December 2018 there were 8841 clinics administering health services and providing medical and/or specialist services: 2269 general hospitals and 544 specialised hospitals. The total number of beds reached 310,710, of which 281,082 – or around 90% – were in general hospitals. This represents a 16.9% increase in the number of hospitals since 2014, a marker of the government’s efforts to address wider demand. There were also 9993 puskesmas, an increase of around 13% from 8825 in 2017, which has enabled better provision of primary health care.

While the overall ratio of beds to the total population in Indonesia in 2018 stood at 1.17 per 1000, this masks considerable variation by locality: just eight provinces had an insufficient bed-to-population ratio in 2018, according to the MoH, including Riau, with 0.98; West Java, with 0.85; and West Nusa Tenggara, with 0.71. To accelerate the development of health care services outside of Indonesia’s urban centres, the central government has targeted regions that it identifies as underdeveloped, frontier and outermost as the priority for development under Presidential Regulation No. 131 of 2015. This includes approximately 143 regions and cities across 27 of the country’s provinces. It also requires that the local authorities evaluate the health care needs of their communities and submit the findings to the central government to aid in planning.

The Covid-19 pandemic has added urgency to the task of expanding medical facilities. As a shortterm solution the country readied 10,000 beds at 1000 hospitals nationwide in April 2020 to accommodate the spike in patients. The government has also worked to reduce red tape to speed up local production of ventilators – a move that will benefit the health care system beyond the pandemic.

Pharmaceuticals

Indonesia’s pharmaceuticals market – which is expected to value $10.1bn by 2021, according to consulting firm GlobalData – is dominated by domestic players, of which there are 178, compared to 24 multinational players. Goals of the MoH’s Strategic Plan 2015-19 included increasing both the access to and the quality of pharmaceuticals and medical devices. These include a baseline that puskesmas have 80% availability of essential medications and vaccines. The Indonesian government has begun to relax some regulations to allow greater investment from foreign companies in the pharmaceuticals market and the active pharmaceutical ingredient (API) industry. The API manufacturing market in Indonesia remains very small and highly dependent on imported materials – which increases drug prices. Since 2016 the Indonesian government has allowed 100% foreign ownership in pharmaceuticals companies, removing the prior restriction of 85%, giving foreign companies the ability to set up formulation plants and API manufacturing facilities in the country in collaboration with local partners, and promoting greater domestic production.

A pharmaceuticals holding company consisting of state-owned enterprises Bio Farma, Kimia Farma and Indofarma – with the first positioned as the controlling shareholder of the remaining two – has been established and tasked with the oversight of feedstock for the local pharmaceuticals industry. With total assets amounting to approximately Rp30.6trn ($2.2bn), the holding company seeks to reduce the nation’s dependence on imports of medical raw materials by 5% per year. Hopes are high that domestic production will continue to rise, placing Indonesia on the path to greater self-sufficiency, with the pharmaceuticals market forecast to experience a compound annual growth rate of 10.3% between 2016 and 2021.

One remaining challenge is incorporating pharmaceutical suppliers into the rollout of UHC. With a greater demand for medication that accompanies increased coverage, stakeholders and investors are paying closer attention to the pharmaceuticals market. “Indonesian health care services are moving forward significantly. The implementation of JKN, as well as the growth of the middle class, has meant that pharmaceutical companies are adapting their approach to the market,” Jorge Wagner, chair of the International Pharmaceutical Manufacturers Group, told OBG. However, generic drugs are prioritised in public hospitals under the JKN, and regulations regarding prescriptions in public hospitals and clinical guidelines are being tightened. This limits the population’s demand for branded medications from local and multinational players.

Outlook

When the immediate challenges from Covid-19 are overcome, the government will need to refocus efforts on addressing shortfalls in the implementation of the JKN. The high costs of NCDs will warrant a reorientation of health care initiatives that focus on preventive care in order to address the shifting epidemiological landscape and burden of care, and the role of the JKN will be pivotal in this. Meanwhile, the move towards UHC is driving increased demand for private health care, opening new opportunities for collaboration.

Going forwards, investment in digital health and technology-based platforms – the importance of which has been highlighted by the pandemic – must continue to ensure that the health care sector’s reach is vast and sufficient. This should spur greater focus on personal health across the population.