HealthFinancingFunctions

The threebasicfunctions ofanyhealthfinancingsystemare revenuecol

lection,riskpooling,andpurchasingofservices.Figure3.1highlightsthese
basic functions, together with the basic health system objectives they are
designedtoachieve.Countriesneedtofocusnotongenericmodelsbuton
healthfinancingfunctions andobjectives andthespecificmicroandmacro
policiesneededtoachievethem.Revenuecollection,publicorprivate,entails
collectingsufficientandsustainablerevenuesinaneconomicallyefficient(so
taxesdonotdistorttheeconomy)andequitablemannertoprovideindividuals
withaBasicBenefitsPackage(BBP)thatimproveshealthoutcomes,provides
financialprotection,andisresponsivetoconsumers.Theserevenuesarethen
pooled toprovidepeoplewith insurance protectionagainstunpredictably
largemedicalcareexpenses.Coveredservicesarethenpurchasedefficiently
so as to maximize health outcomes, financial protection, and consumer
responsiveness.

Some of these functions for specific groups (for example, higher income
earners)andtypesofservicescanbeaccomplishedthroughprivateorpublic
financingarrangements.Therearenoonesizefitsallsolutions,andgeneric
modelssuchassocialhealthinsurance(SHI),nationalhealthservices(NHS),
and private voluntary health insurance (PVHI) are, individually, extremely
limitedinprovidingthespecificpolicydirectionneededtoachievethehealth
financingandhealthsystemgoals.Mostcountrieshealthfinancingsystems
represent combinations of these models. In fact, the new SHI model,
generallyknownasmandatoryhealthinsurance,explicitlyrecognizesthisfact
bybeingcharacterizedasamodelinwhichthepoorarecoveredthroughthe
general government budget (an NHS characteristic), while other groups are
financedthroughmandatoryindividualcontributions,employercontributions,
orboth(anSHIcharacteristic).Insomecountries,higherincomeindividuals
opt out to use higherquality or higheramenity private services, which, in

effect,allowsscarcepublicfundstobeconcentratedonthepoorthroughuni
versal coverage. Getting this balance right is difficult because it requires a
goodquality public system, one that betteroff citizens will continue to
politicallysupport,eventhoughonoccasiontheymaygooutsidethepublic
systemforbetteramenitiesandqualityforcertainservices.

IndonesiasHealthFinancingPrograms
TheevolutionofIndonesiashealthfinancingprogramshasarichhistory.This
evolutionstartedduringthecolonialperiodandischaracterizedbythechange
fromtraditionalmedicinerootedintheChinesesystemtoWesternmedicine
(Boomgaard 1993). In the early twentieth century, the Dutch established a
mandatoryhealthinsuranceschemeforcivilservants. 1 Theproviderwasthe
governmental hospital, which supplied a free, comprehen sive package of
benefits.In1938,allcivilservantsandtheirfamilieswereincludedunderthe
samebenefitpackage;in1948,a3percentcopaymentforinpatientservices
wasintroduced.
AfterIndonesiagaineditsindependencein1945,theregulationregardingcivil
servantshealthinsuranceineffectduringtheDutchIndiesgovernmentwent
into effect for government officers through the early Asuransi Kesehatan
(Health Insurance), or Askes, scheme (GuadizPadmohoedojo 1995). The
budgetwasprovidedtotheMinistryofHealth(MoH)andhospitalswere
reimbursedforservicesprovidedtocivilservantswithsalariesbelowafixed
ceiling. Health services were free of charge in public hospitals and
reimbursableinprivatehospitals.Forinpatientservicesa3percentcopayment
wascharged.Thereimbursementsystemworkedasfollows:Healthinspectors
attheprovincelevelverifiedclaimsthatwerebroughttothereimbursement
officeinthecentralMoHoffice.Afterverification,theclaimwasbroughtto
the State Exchequer Office, which would pay the MoH. Early problems
identifiedinthisschemeincludethosethatmoderninsuranceschemescontinue
tosuffer:moralhazard,highcoststothepublicbudget,highadministrative
costs,andnoncoverageofretiredofficers.
AskesPersero,thepredecessorto P.T.Askes,wasestablishedin1968under
PresidentialInstructionNo.230/1968tofinanceanddeliverhealthinsurance
services to both active and pensioned civil servants, including their direct
family members. In addition, Ministry of Health Regulation No. 1/1968
providedP.T.Askeswithexclusiverightstomanageitsowninsurancefundto
supportadministrativeandfunctionaloperations.Startingin1991,P.T.Askes
broadened its market and product coverage to the provision of commercial
healthinsuranceprogramstothepublic.In1992,the JaminanSosialTenaga

Kerja (Workforce Social Security), or Jamsostek, social securitybased

programforprivateemployeesandemployerswasintroduced.
Inresponsetothefinancialandeconomiccrisisof199798,newemphasiswas
placedonpropoorfinancingandanumberofeffortswereundertakentodeal
withtheseverecircumstances.Donorfundingincreasedsharplyin199899so
thattheoveralllevelofpublicfundingremainedclosetoitslevelsoftheearly
to mid1990s. The government of Indonesia developed several targeted
programstocushiontheeconomicshocksofthecrisisonthepoorandother
vulnerablegroups.Theseprogramsarecollectivelyreferredtoasthe Jaring
PengamanSosial(SocialSafetyNet)orJPSprograms(table3.1).JPSschemes
included workfare, subsidized rice sales, targeted scholarships, health
subsidies,andvillageblockgrants.Moreover,overthisperiod,theMoHwas
involvedin encouragingvarious communitybased andvoluntary initiatives,
includingthepromotionofVillageCommunityDevelopment(Pembangunan
KesehatanMasyarakatDesa)andcommunitymanagedhealthcarebasedon
theAmericanhealthmaintenanceorganizationmodel(JaminanPemeliharaan
KesehatanMasyarakat,orJPKM).
The platform for universal coverage was established in 2004 with the
introduction of a new health program for the poor, Asuransi Kesehatan
MasyarakatMiskin(HealthInsuranceforPoorPopulation)orAskeskin,which
wasdesignedtoincreaseaccessto,andthequalityof,healthservicesforthe
poor. The program had two components: (i) operational funds provided to
Puskesmasintheformofcapitationpayments;and(ii)afeeforservicehealth
insurancescheme,coveringthirdclasshospitalbedsandreimbursedthrough
P.T.Askes.Theprogramdifferedfromthepreviousprogramsforthepoorin
twomajor ways: (i) rather than being apurely governmentrunprogram, it
provided a block grant to P.T. Askes, which then targeted the poor with
Askeskin cardsandrefundedhospitalclaims;and(ii)thebeneficiarycardsin
this program were individually targeted rather than household cards as in
previous programs. Initially there were 36.1 million target beneficiaries;
however, the target was soon expanded to include more than 76 million
individuals in2008 underthe current pro gramcalled Jaminan Kesehatan
Masyarakat (Health Insurance Scheme for Population), or Jamkesmas. The
Jamkesmas program is being implemented throughout the country and will
serveasoneofthekeybuildingblocksofthegovernmentsproposeduniversal
coverage scheme, which is designed to synchronize the multiple health
insuranceschemes.
HealthfinancinginIndonesiaiscomplicatedbydecentralizationbecausedirect
payments of salaries and capital costs by all levels of government clearly
impactthehospitalreimbursementschedulesusedbyinsurers.Governments
abilitytomakesuchpaymentsandtoprovideadditionalcoverage(seelocal
experiments discussed in chapter 5) are heavily contingent on their fiscal

capacity.Suchfiscalcapacitydependsonbothlocalrevenueraisingcapacity
andtheflowoffundsthroughtheintergovernmentalfiscalsystemsinwhich
somefundsareearmarkedbycentrallevelgovernment,whileothersarenot,
andformulasusedforredistributingfundsfromcentraltolocalgovernments
oftendonotreflectlocalneedandfiscalcapacity.
Althoughtheconceptatfirstappearssimple, 2 districtsareresponsiblefor
implementing health services. The complexity of the flows of funds some
targeted to health, others not; some payments made through insurance
organizations, and others made directly to public providers (hospitals,
Puskesmas,andpersonnel)makeforanintricate,inequitable,inefficient,and
fragmented set of financing flows (World Bank 2008c). Moreover, recent
studiesalsoindicatethatmanypoordistrictsarereceivingmuchhigherlevels
offundingthanpreviously,buthavebeenunabletospendthesefundsbecause
oflocalabsorptivecapacityconstraints.Othercases,despiteincreaseddistrict
spending,littleeffectivepovertyreductionhasoccurredinsomeofthepoorest
districts(FenglerandHofman2007).Asofmid2009,itisdifficulttogeta
clearpictureoftheextentofcoverage.Reliabledataonthenumbersofpeople
with formal health insurance coverage are lacking. Figure 3.2, using 2007
SurveiSosialEkonomiNasional(NationalSocioeconomicSurvey),orSusenas,
surveydata,indicatesthatin2006onlysome26percentoftheIndonesian
populationwascovered,largelythroughtheJamkesmasprogramforthepoor.