Health System in the Republic of Indonesia: Reforms, Transformations, and Challenges

Abstract

Though Indonesia is categorised as a lower-middle-income country (LMIC), it has shown progress in strengthening its health systems since the 1950s. This paper studies Indonesia’s journey in transforming the provisioning and financing of its health services since President Soekarno’s regime in the 1950s and 1960s. The country has gone through several reforms in the past few decades. Indonesia began its development journey optimistically in the 1950s but was unable to progress towards universal, comprehensive, and equitable health services due to several barriers such as geographic constraints, political struggle and tensions between the centre and remote islands, and the privileging of civil servants and military personnel. The Suharto era (1966–98) was characterised by similar challenges, but it saw the development of health infrastructure at the primary level as well as the growth of the private sector. However, access to health services was still weak as the majority of the population lacked financial protection. The Asian financial crisis of 1997 led to a political
transformation towards democratisation as well as a significant move towards decentralisation. To appease the population in a context of economic instability leading to social unrest, health insurance schemes to cover the poor and near-poor populations were launched over the next few years. The 2004 Social Security Law was passed, but the mandate of providing universal coverage to the population was implemented only in 2014, when various insurance schemes were merged into a single pool and a Social Security Management Agency was created to administer the National Health Insurance. The health system in Indonesia is characterised by low funding for health but has been an ambitious plan to provide coverage to all through insurance mechanisms that include individual contributions and government subsidies. This paper analyses these transformations systemically and studies the achievements and challenges in reforming health services in Indonesia over the years to the present.