Business

Analysis: Indonesia: The
health of the nation

Indonesia’s government is pushing forward with ambitious plans to reform the country’s health network, aiming to have a system of universal social health insurance coverage in place by 2014, though the project faces a number of challenges, not least of which are its sheer scale and cost.

Currently, an estimated 56 percent of Indonesia’s population of around 240 million — mainly state employees, low-income earners and those with private coverage — have some form of health insurance. With a steep rise in the incidence
of non-communicable diseases and an across-the-board increase in health costs, more of those not covered by various schemes or without access to free care are having difficulty affording essential medical services.

The Health Ministry aims to put in place a standard coverage scheme that will provide a base safety net for all Indonesians. In a recent interview with the Reuters news agency, Indonesia’s health minister, Endang Rahayu Sedyaningsih, said the plan involved making basic hospital medical services available nationwide through an increase in state spending and by encouraging the private sector to boost investments in health infrastructure.

“We are aiming that everybody doesn’t have to pay when they are hospitalized in class-three [basic] hospital beds,” Endang said on March 31. “They will be covered by either the central government or the provincial government.”

While the government has increased the ministry’s funding by 10 percent this year to US$3 billion, this is still well short of the level needed to meet the 2014 goal of universal coverage, with a further $1.15 billion required annually to ensure that Indonesians who live in poverty get free hospital treatment.

Funding alone will not cure what ails the Indonesian health service, according to Luthfi Mardiansyah, the president director of leading pharmaceutical firm Novartis Indonesia: The government must also make sure that both the necessary infrastructure and medical professionals are provided to make a national health scheme work.

“A reform of the healthcare system is needed,” he told OBG. “The number of doctors is clearly not sufficient in the country, not to mention [the number of] specialists.
The distribution of doctors is also inequitable.”

The government is taking steps to address this issue, looking to revive a plan first mooted two years ago to provide financial incentives to doctors to encourage them to relocate to more remote areas of the country. In early April, Endang said legislation had been drafted that would help achieve the goal of having medical practitioners more evenly distributed throughout Indonesia, rather than having most concentrated in urban areas, especially in and around Jakarta.

Data from the Indonesian Doctors Association show that two-thirds of Indonesia’s doctors are based in Java, with almost 30 percent of the total operating in the capital, and many of the country’s medical facilities are understaffed. Though the government has already moved to increase the numbers of doctors based in remote areas, recently instituting a program under which newly graduated practitioners are to be deployed in rural regions for a one-year term, this will only go part of the way to redress the imbalance between town and country in terms of service provision.

However, it is as yet unclear if the government’s proposed incentives, which would see doctors offered around $600 a month to serve in remote districts, rather than the present $345, will be enough to entice medical professionals away from the comfort and better earning opportunities of the cities.

While the state is working to put in place its universal health system, many in the sector see it as a prolonged process. According to Patrick Ng, the managing director of pharmaceutical giant GlaxoSmithKline Indonesia, though the ministry is pushing for social reform in healthcare, it faces the challenge of aligning the views of different stakeholders, and this may make the 2014 deadline difficult to meet.

Even with blanket health coverage in place, Ng foresees room for expansion in the private sector, thanks to the broadening of Indonesia’s middle class and the rise in purchasing power.

“In the medicines market, the potential growth will come from over-the-counter [medicines] in the coming years,” he said in recent interview with OBG. “In addition, the pattern is that local branded generics will replace branded medicines as they are cheaper and more affordable for the population.”

The issue of affordability is one that has been raised by a number of representatives of the pharmaceuticals industry, with many believing that high taxes on some imported products and restrictions on foreign companies, while protecting some local producers, are driving up costs to the consumer.

Lifting the requirement for foreign companies to have a local manufacturing base to be allowed free access to the market would be one step that could help to strengthen the sector. While the market is expanding rapidly, given its relatively small size at present, manufacturing on a limited scale may not be
cost-effective, especially for producers of specialized biological pharmaceuticals.

Production costs are just one issue affecting the sector, however, and there remains a need for the government to address a range of other challenges, including the need to improve the training of medical staff and boost efforts to raise health awareness.

Though the Indonesian market may be small, this will change as the population continues to grow, income levels rise and lifestyle-related illnesses become more prevalent. While a more affluent Indonesia will be able to afford a better health service in the years to come, the reality is that in some ways that affluence will also add to the burden of a reformed system.

The writer is the editorial manager of Oxford Business Group.

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