## Universal Health Coverage in Indonesia: Informality, Fiscal Risks and Fiscal Space for Financing UHC

## Source details

**Canonical URL:** [Universal Health Coverage in Indonesia: Informality, Fiscal Risks and Fiscal Space for Financing UHC](https://www.imf.org/-/media/files/news/seminars/2a2_presenter_dartanto.pdf)

## Other formats

- [Markdown version](/-/media/files/news/seminars/2a2_presenter_dartanto.pdf.md)
- [Structured JSON version](/-/media/files/news/seminars/2a2_presenter_dartanto.pdf.json)

---

### SDGs and UHC definition
- SDGs: 17 Goals & 169 Targets.
- Goal 3: Good Health and Well-Being with 9 Targets, including:
  - 1. Maternal mortality
  - 2. Neonatal mortality
  - 3. End of communicable disease
  - 4. Premature mortality from non-communicable disease
  - 5. Preventing of substance abuse
  - 6. Global deaths and injures from road traffic accident
  - 7. Universal access to reproductive health care services
  - 8. Universal Health Coverage
  - 9. Deaths and illness from hazardous chemicals
- WHO definition of Universal Health Coverage (UHC): all people and communities can use promotive, preventive, curative, rehabilitative and palliative health services they need, of sufficient quality to be effective, while also ensuring that the use of these services does not expose the user to financial hardship.

### Approach to achieving UHC and JKN system features
- Two-phase approaches described:
  - Initial (non-contributory, tax-financed) phase: faster, less sustainable (strong taxation), can increase informalization. (Case: Thailand as example of divergent phase)
  - Contributory phase: slower, more sustainable, costly collection. (Case: Philippines, Indonesia)
- Key features of JKN (Program Jaminan Kesehatan Nasional / BPJS Kesehatan):
  - A single carrier of BPJS Kesehatan.
  - Compulsory for all residents (including foreigner living at minimum 6 months) to register in JKN.
  - Contribution system with self-enrollment for informal sectors.
  - Comprehensive package and referral system.
  - Note: Any additional family members such as parents and parents in law may be registered with a contribution rate of 1 per cent per person per month.

### Current progress, membership dynamics, and the "missing middle"
- Membership growth dynamics (author calculations and BPJS data):
  - Membership growth of informal sector was 30.78%/month (associated with moral hazard).
  - Membership growth for the informal group slowed from 6.55%/month (2015) to 2.17%/month (2016).
  - 34% is still uncovered by BPJS Kesehatan (mostly informal sector).
- Utilization and claim ratios by membership type (BPJS Kesehatan December 2014 in ADB-LPEM Report 2015):
  - Poor and Near Poor (Government Subsidy/PBI):
    - Total Member (person): 87,828,613
    - Utilized Member (person): 3,608,629
    - Utilization Rate (%): 4.11
    - Av. Premium (IDR/Capita/Month): 18,668
    - Av. Medical Cost (IDR/Capita/Month): 8,813
    - Avarage Claim Ratio (%): 47.21
  - Formal Sectors:
    - Total Member (person): 23,456,697
    - Utilized Member (person): 4,492,821
    - Utilization Rate (%): 19.15
    - Av. Premium (IDR/Capita/Month): 62,349
    - Av. Medical Cost (IDR/Capita/Month): 72,629
    - Avarage Claim Ratio (%): 116.49
  - Self-Enrolled Member (Informal Sector/PBPU):
    - Total Member (person): 13,882,595
    - Utilized Member (person): 4,510,874
    - Utilization Rate (%): 32.49
    - Av. Premium (IDR/Capita/Month): 11,318
    - Av. Medical Cost (IDR/Capita/Month): 73,036
    - Avarage Claim Ratio (%): 645.32
  - Total Member:
    - Total Member (person): 132,354,398
    - Utilized Member (person): 12,612,324
    - Utilization Rate (%): 9.53
    - Av. Premium (IDR/Capita/Month): 25,638
    - Av. Medical Cost (IDR/Capita/Month): 26,859
    - Avarage Claim Ratio (%): 104.76
- Note: Utilization rate and average claim ratio of Poor and Near Poor are the lowest due to (possibility) lack of access.

### BPJS Kesehatan deficits and fiscal risk
- Reported deficits and projections:
  - 2014: IDR 3.1T ($235M)
  - 2015: IDR 5.8T ($440M)
  - 2016 projected: IDR 6.8T ($515M)
  - 2017 projected: IDR 8.6T ($660M)
- Drivers of high claim ratio:
  - Premium set below actuarial calculation.
  - Low collection on revenue.

### Fiscal burden, projections, and estimated fiscal needs
- Fiscal burden components:
  - Central Government fiscal needs include improving supply side (health services), subsidy of premium for poor and near-poor (PBI), fiscal incentive to non-poor informal sector to join BPJS Health, and fiscal risk from BPJS Health "Bailout".
- Projection methodology (author’s framework):
  - Projection of JKN Member.
  - Utilization Rate of Health Care (In & Outpatient).
  - Cases of Health Care (Utilization Rate x JKN Member).
  - Health Care Costs (# Cases x JKN Member) + Capitation.
  - Revenue from Contribution (JKN Member x Average Premium).
  - Claim Ratio (Revenue/Cost).
- JKN coverage projection and fiscal cost summary (author’s calculation):
  - PBI’s subsidy covers 40% of the lowest income group.
  - Increasing BPJS Kesehatan’s Deficit (optimistic scenario of having cost controlling).
  - Fiscal cost in 2030 equals to USD 8.5 Billion.
- Improvement scenarios impact on fiscal cost (author’s calculations):
  - Improving premium collectability, especially on self-enrolled member, can reduce fiscal cost from IDR 69.2T to IDR 45.7T.
  - Improving (better health condition) Health Care Utilization can reduce fiscal cost from IDR 69.2T to IDR 32.2T.
  - Associated dollar figures shown in presentation: $2.44B, $3.46B, $4.06B, $5.24B (context: scenarios of cost reductions).

### Financing UHC: scale and budget implications
- Cost of UHC trend:
  - Cost of UHC increasing over year.
  - Cost of UHC would be almost double within 10 years from 1.9% (2014) of Government Expenditure to 4.5% (2030)*.
  - Note: Gov. Exp. not included Gov. Transfer to Local Government.
- Financing option: fully subsidize informal sector
  - Fully subsidy for expanding the coverage of informal sector would increase the fiscal cost of UHC.
  - With the fully subsidy of informal sector then cost would be 15.1% of VAT Revenue.
  - Note: Gov. Exp. not included transfer to local government.

### Policy options, trade-offs, and "Way Forward"
- Policy options and pros/cons (author’s presentation):
  - Business as Usual:
    - Pros: Contribution based; Less cost for Central Government; Easy to implementation; Political support.
    - Cons: Missing middle problem; Low coverage; Burdening Central Government Budget; Sustainability Issue; Informalization.
    - Target for the 2019 UHC: Difficult to Achieve in 2019.
  - Fully Subsidy for the Informal (General Taxation):
    - Pros: Easy to implementation; Political support.
    - Cons: Burdening Central Government Budget; Sustainability Issue; Informalization.
    - Target for the 2019 UHC: Guarantee Accomplished in 2019.
  - Earmarking of Tobacco Excise Tax:
    - Pros: Cost sharing between individual and Government.
    - Cons: Sustainability of Tobacco Excise Tax for Financing UHC (Tobacco Tax should decrease).
    - Target for the 2019 UHC: Probable Accomplished in 2019.
  - Incentive for Informal Sector to join JKN:
    - Pros: Cost sharing between Central and Sub National Governments (SNGs).
    - Cons: Incentive may not work; Regulation issues.
    - Target for the 2019 UHC: Accomplished more than 2019.
  - Local Government Involvement:
    - Pros: Cost sharing between Central and Sub National Governments (SNGs).
    - Cons: Burdening SNGs Budget.
    - Target for the 2019 UHC: Possibility to accomplished in 2019.
- Recommended cost-reduction priorities:
  - Improving collection rate and cost controlling of health services.
  - Promoting healthy behavior (reducing morbidity) via public health interventions would be the most effective way to reduce cost.

### Concluding remarks and implications for SDG financing
- With the current path (without any massive intervention), UHC is difficult in 2019, but possible in 2030.
- Cost of achieving UHC is gradually increasing over time (double within 15 years) → possible burden for the government budget in the future.
- Covering all of those in informal sector to join JKN via fully subsidy of premium would be very costly for the government budget and create the possibility of "informalization" of formal sector.
- How to reduce cost of UHC: improving collection rate and cost controlling of health services, but promoting healthy behavior (reducing morbidity → role of public health) would be the most effective way.
- Accomplishing 1 target of 169 targets is cost around 4.5-5.7% of central government budget in 2030 (0.5% of GDP); every government should carefully assess their financing need (priority) for SDGs.

### Assumptions used in fiscal calculations (author’s note)
- Population growth follows the BPS projection.
- JKN Member Optimistic Scenario:
  - FY2014-16(BPJS report), FY2017(12.75%), FY2018(13.75%), FY2019(15.50%), FY2020-21(2%), FY2022-23(1.75%), FY2024-25(1.5%), FY2026-30(99.5% of Population).
- Average Premium Contribution:
  - FY2014-15 (BPJS Report), FY2016-20 (5% every year), FY2021-22 (4% every two years) FY2021-22 (4% & 3%/year), FY2023-30 (2%/year).
- Average treatment costs assumptions:
  - Inpatient: FY2014(BPJS Report), FY2015(2%), FY2016-2019(1%), FY2020-2030(2%).
  - Outpatient: FY2014(BPJS Report), FY2015(5%) FY2016-30(3%).
  - Capitation: FY2014(BPJS Report), FY2015-19(5%), FY2020(4%), FY2021-30(3%).
- Average Utilization Rate of Outpatient and Inpatient: on average 4%/year.

---


_Source: https://www.imf.org/-/media/files/news/seminars/2a2_presenter_dartanto.pdf_