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Indonesia Healthcare Landscape - An Overview, July 2014


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A brief description of Indonesia's healthcare landscape and the challenges it faces. The country has no choice, but to attract greater investments (also importantly, foreign investments) in capacity creation.

Indonesia Healthcare Landscape - An Overview, July 2014

  1. 1. CAT PULT This document has been produced by Catapult Pte Ltd. Copyright restrictions (including those of 3rd parties) are to be observed. All information, views and advice are given in good faith. Whilst every effort has been made to ensure the accuracy of the information and data contained herein, Catapult accepts no responsibility for any errors and omissions, however caused. Information contained in this document is not legal advice and does not bear any legal responsibility.! Prepared by Catapult! July 2014! Indonesia Healthcare Landscape! An Overview!
  2. 2. Strictly Confidential 2 Contents! ! 1. Current Macro-Economic Situation 03 2. Current Healthcare Landscape 06 3. Healthcare – Drivers and Key Challenges 11 4. Back Up 13
  3. 3. Strictly Confidential 3 Macro-Economic Situation – current state!
  4. 4. Strictly Confidential 4 A Brief Overview
 ! * PPP is Public Private Partnerships Sources: ADB – Asian Development Outlook (‘14); World Bank – Economic Quarterly (Mar ‘14) & Development Policy Review (May ‘14) Contributors to Indonesia’s Growth – Demand-side §  Overall, current macro-economic situation demands caution given the following: -  Return to current account deficit since 2012 (currently nearly 3% of GDP) -  Recent policies such as new trade & foreign ownership laws (and ban on unprocessed mineral exports), which negatively impact investment climate §  Only adjustment in structural factors will bring about sustainable, long-term positive change -  Policies that encourage manufacturing investment (& investment in infrastructure, not just in construction) -  Allow increased private sector investments (on capex), incl. through mechanisms such as PPP projects 4.6 6.2 6.5 6.3 5.8 -3.0 -1.0 1.0 3.0 5.0 7.0 2009 2010 2011 2012 2013 Private consumption Government consumption Fixed investment Change in inventories Net exports Statistical discrepancy % GDP Note: Y-axis, in % Rapid economic expansion between 2009-2012 raised expectations significantly for Indonesia; growth expectations, at least for the next 2 years, have been tempered back
  5. 5. Strictly Confidential 5 Short-to-Medium Term Challenges
 basis key current macro issues! * As of revised budget estimates for 2013 Sources: World Bank – Indonesia Development Policy Review (May 2014 Report); Asian Wall Street Journal (news item 03rd July 2014) Going forward, unfavorable economic policies is a key risk; Unless foreign investment in capacity creation is encouraged, Indonesia health system will remain under-served Potential Risks – Health Sector 1.  Fiscal pressure, impacting Government spending Challenges §  Slowing economy has resulted in lower government revenues (95% of budget*), reducing its ability to spend – Despite this trend, deficit is set to rise in 2014, putting further strain on government spending §  Inadequate spending under universal healthcare, which would demand (read: needs) increased funds allocation from the govt. §  Fixed investment as % of GDP has started to dip, after rising strongly (25% to ~33%, between 2007-12) §  FDI is at <3% of GDP, has plateaued in 2013 (& slowing in 2014) §  Fiscal challenges could mean required & necessary govt. investment in health infrastructure takes a back seat vis-à-vis other priorities §  Over-reliance on investments in mining and in construction §  Investment in high-technology manufacturing not materializing (e.g. Samsung, Blackberry, Foxconn) §  Investments, incl. in new technology/services in health sector has not picked up à Indonesians continue to go abroad for treatment 2.  Investment slowdown (incl. Foreign Direct Investment) 3.  Lack of high value- add manufacturing & services Why?
  6. 6. Strictly Confidential 6 Healthcare Landscape – an overview!
  7. 7. Strictly Confidential 7 Healthcare Landscape, 1 of 2! an overview
 ! Central / Other Agencies* District / Provincial / Municipal Sub-District, Commune and Village Set Up ~ 200 hospitals (est. 26,500 beds all together) ~380 hospital (est. 48,500 beds) ~ 30,000 facilities (of which only about 2,500 of these provide in-patient facilities) Notes §  Only approx. 3/4th of the public health budget is spent year-after- year §  Absenteeism remains high & rampant (up to ~40% for doctors remain absent from duties) §  Continued dependence on pharmacies/drug-stores for diagnosis & prescription – self treatment (for those ill) remains high (~50% in ’06) Briefly, §  Over & above the public facilities – as highlighted above – there are nearly 450 hospitals in the private sector (accounting for ~ 37%, or 44,000 beds across the country), though they are largely concentrated in the top 5 cities of Jakarta, Surabaya, Bali (Denpasar), Medan & Yogyakarta §  Various estimates suggest Indonesians spend nearly US $ 1 Bn. in health services in neighboring Singapore & Malaysia (medical tourism for the two countries) §  There is unequal distribution of health personnel across the country, with an estimated 18 of the 33 provinces having less than 1 doctor per puskesmas (sub-district level primary care facility) Overall, an est. 1,050 hospitals in the country * Other Agencies include Armed Forces, or Police, or other ministry-owned or State-owned Enterprise Sources: World Bank, USAID Report (2009); Catapult analysis
  8. 8. Strictly Confidential Overall, there were only approx. 70,000 medical doctors in the country, with only about 15,000 specialists Healthcare Landscape, 2 of 2! an overview
 ! 8 Sources: Ministry of Health; Health Financing in Indonesia, World Bank (2009); Indonesian Medical Council, Java & Bali % of Population % of Hospitals % No. of Beds % of all Doctors 59% 51% 55% 67% Sumatra 22% 25% 23% 19% Rest of Country 19% 24% 22% 14%
  9. 9. Strictly Confidential The employed (~131 Mn.) Health Insurance Coverage
 an overview
 ! Current Population (~240 Mn.) Police and Military Military Health Services 2.2 Mn. Civil Servants ASKES (Civil Servants insurance) 17.3 Mn. Private Sector JAMSOSTEK (Workers Social Security) 5.6 Mn. Private (self- insured) & Commercial Insurance 18.3 Mn. No Insurance / Reimbursement System 88.4 Mn. Self Employed / Unemployed (~108 Mn.) JAMKESMAS (health insurance for the poor) 76.4 Mn.* JAMKESDA (regional govt. health insurance) 31.9 Mn. ~25 Mn. insured under different govt. schemes ~18.3 Mn. insured in the private sector ~108.3 Mn. insured by under 2 schemes 2012 Targeted to go to 257.5 Mn. (the entire population) by 2019 * Expected to increase to 86.4 Mn. people by end-2013 as part of transition to universal coverage Notes: Figures may not fully add-up due to rounding-off error; data as of 2012 9
  10. 10. Strictly Confidential 10 Roadmap to Universal Health Coverage
 present-day to 2019! Universal Health Coverage under BPJS I As of Jan 2014 2015 2016 2017 2018 2019 ~122 Mn. under mgmt. of BPJS I 257.5 Mn. people covered by UHC Private sector coverage (according to company size): - 20% large - 20% medium - 10% small - 10% micro companies Private sector coverage(according to company size): - 50% large - 50% medium - 30% small - 25% micro Companies All JAMKESDA members will be covered by BPJS Private sector target coverage (according to company size): - 75% of large - 75% medium - 50% small - 40% micro companies Private sector coverage (according to company size): - 100% large - 100% medium - 70% small - 60% micro companies Private sector coverage (according to company size): - 100% large - 100% medium - 100% small - 80% micro companies Target 100% of Indonesia population ~15 Mn. people still covered by JAMKESDA Jamkesmas, operational since 2005, is estimated to have ~122 Mn. members (as of Jan 2014), when UHC started under BPJS I
  11. 11. Strictly Confidential 11 Healthcare – drivers and key challenges!
  12. 12. Strictly Confidential 12 Drivers and Key Challenges
 likely developments in health landscape! Macro-Economic factors Health Financing & Sector reforms Disease Burden & Treatment Challenges Infrastructure / Capacity creation §  Despite challenges, economy is likely to be among the fastest growing within ASEAN (5.5%+ y-o-y), in the medium-term §  Indonesia is rapidly urbanizing & would have ~135-140 Mn. middle-income & affluent consumers by 2020 §  Expenditure on health is amongst the lowest in the region (<3 % of GDP, of which govt. spending is ~1.2%) §  Implementation of the Universal Health Coverage scheme is the biggest health reform undertaken. Over time, this has the potential to transform health services in the country, though funding challenges remain §  ~2/3rd of all deaths are caused by non- communicable diseases (also, >50% of deaths are due to chronic conditions) §  TB & other respiratory diseases are significant challenges, as are CVD and certain cancers §  There is also significant variation in treatment rates in rural areas, given generally poor facilities §  Indonesia’s existing health infrastructure is old & dilapidated. It suffers from the problem of poor manpower resources, lack of investments in equipments & other systemic issues (absenteeism, corruption) §  Unless new, capacity is created (in both, primary & secondary care), chronic issues to persist Sources: Ministry of Health; World Bank Reports (multiple); Asia’s Next Big Opportunity – BCG (2013 Report); Unleashing Indonesia’s Potential – McKinsey (2012 Report); Catapult analysis
  13. 13. Strictly Confidential 13 Back Up!
  14. 14. Strictly Confidential Evolution of Indonesia’s Health Insurance Programs
 up to 2012
 ! Year Initiative 1968 Health Insurance for civil servants 1992 Social Security for Private Sector employees – Jamsostek, JPKM (HMOs) and CBHI 1999 JPS (Social Safety Net); financial assistance for the poor via ADB loan 2000 Comprehensive review of health insurance and amendment of constitution to prescribe the rights to health care 2004 National Social Security (SJSN) Law (No. 40/2004) mandated social health insurance for the entire population 2004 Introduction of Asuransi Kesehatan Masyarakat Miskin (health insurance for the poor) 2008 Askeskin is renamed Jamkesmas and extended to the near poor 2010 Law No. 17: The National Development Middle Plan (RPJMN) reconfirmed Indonesia’s commitment to provide universal health coverage by 2014 2011 Constitution No. 24/2011: Social Security Providers Bill is passed, which mandates that the Social Security Agency (BPJS) would be operational by January 1, 2014 Sources:; 14
  15. 15. Strictly Confidential 15 Key Elements of Universal Health Coverage
 funding and resource contributions
 ! * Original calculations were for a subsidy of between Rp 22,000 – Rp 27,000 per person per month for those categorized as poor; premium contributions also differ by type of hospital accessed for services ** 3% paid by employer & 2% by employee (in certain cases share of contribution is 4% employer & 1% employee); though under Jamsostek it is mandatory to register employees, compliance (estimates suggest only about 25% of formal sector employees are currently covered) Note: DRG is Diagnosis Related Group; INA-CBG is Indonesia Definitions; exchange rate may not up to date; $ are US$ Resource Contributions Extent of Pooling Purchasing / Provision Govt. Rp 15,500 (~ $ 1.5) payout* (revised subsidy in 2013) / person / mth. by the govt. as contribution for the poor Existing funds to be pooled by 2014: §  Jamkesmas §  TNI/Polri (military & police) §  Askes PNS (civil servants) §  JPK Jamsostek §  Some of Jamkesda TOTAL: 121.6 million Hospital §  DRG payments based on INA-CBG. Amounts to be negotiated with hospital associations & to vary according to region Formal Sector 5% of wages** shared between employer & employee By 2019: total population, incl. remainder of Jamkesda schemes TOTAL: 257.5 million Primary Health Centre §  Monthly capitation contribution based on registered users for public & private clinics Informal Sector Self-funded contribution of ~5-6% of monthly income (+some govt. contribution) BPJS as single institution managing pooled funds to be formed by conversion of PT Askes Benefit Package §  Comprehensive §  Initially public ward for govt. contributor & 2nd class ward for self- funded; shift to 2nd class for all by 2019
  16. 16. Strictly Confidential Thank You! Catapult Pte Ltd. Web: Contact: Praneet Mehrotra, Partner Tel.: +65 6321 8930, +65 9179 1410 Mail: CAT PULT Partnership. Results.!