indonesia healthcare landscape - an overview, july 2014

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Prepared by Catapult! July 2014!

Indonesia Healthcare Landscape!An Overview!

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


Macro-Economic Situation – current state!


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


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?


Healthcare Landscape – an overview!


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

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, http://www.inamc.or.id/

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%


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


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



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


Healthcare – drivers and key challenges!


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


Back Up!


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: http://www.uhcforward.org/content/indonesia; jamsosindonesia.com/english 14


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


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