90526 East Asia and Pacific HNP Brief Series FISCAL SPACE FOR UNIVERSAL HEALTH COVERAGE IN INDONESIA: LESSONS FROM JAMKESMAS FINANCING Author : Xiaolu Bi, Ajay Tandon, Cheryl Cashin, Pandu Harimurti, Eko Pambudi, and John Langenbrunner. This policy brief discusses fiscal space for UHC in Indonesia by examining the experiences from the financing of Jamkesmas over the period 2005-2012. Analysis of data indicates Jamkesmas financing resulted from generally conducive macro-fiscal conditions and, to some extent, reallocations within the central government health budgetary envelope. Contrary to expectations, financing of Jamkesmas did not result from a central government reprioritization of health at the expense of other sectors. Such financing modalities would be unlikely to be sufficient as Indonesia looks forward to attainment of UHC by 2019. A combination of central government reprioritization of health, efficiency gains, possible earmarked tobacco taxes, and subnational complementary financing will likely be needed to effectively finance attainment of UHC in Indonesia. Introduction servants, the police, and the military Jamsostek: the contributory social health insurance program Indonesia is in the midst of major health system for the private formal sector reforms aimed at attaining universal health coverage (iii) Jamkesda: these are over 300 local (district and (UHC) for its population by 2019. One key step in provincial) government-financed schemes that the UHC reform process has occurred as of January provide supplementary and complementary 1, 2014 when the country consolidated most existing coverage, with variations in the target population contributory and non-contributory social health covered and in benefits provided insurance programs. Prior to 2014, Indonesia had (iv) Jampersal: the non-contributory central several social health insurance schemes, each covering government-financed program that provided free a different target population and with a different maternal health benefits for all those who did not benefit package. These social health insurance have coverage from other sources. programs included: As of 2014, Jamkesmas, Askes, other public social health (i) Jamkesmas: currently the largest social health insurance programs, and Jamsostek have been merged insurance program for the poor and near-poor, under a unified single-payer umbrella with pooled financed by the central government and with a contributions and harmonized benefits. Jampersal has target population of 76.4 million been phased out. Jamkesda programs are expected to (ii) Askes and other public social health insurance continue for now, but will also likely be merged with programs: these are contributory mandatory other social health insurance programs over time. social health insurance programs for civil Following the 2014 merger, coverage is expected to be expanded to the entire population by 2019. 1 East Asia and Pacific HNP Brief Series East Asia and Pacific HNP Brief Series Page 2 What did we learn? As Indonesia implements these reforms, the issue public financing for UHC from the demand side, without of fiscal space for UHC has become paramount. The offsetting public investment spending to improve the unified social insurance program will pool contributions supply of health services and without jeopardizing from three broad categories of people: (i) the poor and financing for preventive and promotive public health near-poor whose fixed premium contributions will be interventions. There are also large inefficiencies in paid for entirely by the central government (the group public spending for health, for example in terms of that is currently covered under Jamkesmas); (ii) those current provider payment mechanisms, that will need to employed in the formal sector, both public and private, be addressed. whose salary-based contributions will be paid for by employers and employees (this group includes those This policy brief assesses fiscal space for UHC that were covered under Askes and Jamsostek); and (iii) in Indonesia by examining the experience of those who are non-poor and work in the informal sector financing for Jamkesmas over the period 2005-2012. who are expected to pay a fixed premium contribution Are there lessons from the financing of Jamkesmas over upon enrollment in the program (this group would the period 2005-2012 that could help inform a forward- include most of those who are currently uncovered). As looking assessment of fiscal space for UHC in Indonesia? of 2014, the proposed premium for the poor and near- In 2005, Jamkesmas (then called Askeskin) was financed Main facts (optional) poor is Rp 19,225 – lower than the initial discussions in using a premium estimate of Rp 5,000 per member the roadmap of a proposed premium of Rp 27,000 per per month (Rp 60,000 per member per year) and 2005 member per month but still more than three times the expenditures amounted to Rp 1.3 trillion; by 2011, the 2011 Jamkesmas premium rate of Rp 6,500 per member premium had increased to Rp 6,500 per member per per month – and covering an expected population of month (Rp. 78,000 per member per year), the target 86.4 million individuals. 2-3 , This implies that central population had been expanded, and 2011 expenditures government outlays to finance the premiums of 86.4 amounted to Rp 6.3 trillion, a nominal growth rate of million poor and near-poor in 2014 are expected to be Rp 30 percent on average per year. Where did this fiscal 19.9 trillion (~0.2% of GDP) up from 6 trillion allocated space for the financing of Jamkesmas come from? Did for financing Jamkesmas in 2011 (~0.1% of GDP). central government financing of Jamkesmas result from a reprioritization of health in the central government In addition to demand-side financing from the central budget? Or was it a result of economic growth and government, additional supply-side financing from generally conducive macro-fiscal conditions? To what the central, provincial, and district governments will extent were cost-containment and efficiency gains part be needed to meet rising utilization rates as coverage of the Jamkesmas financing strategy? What might be expands. Indonesia’s public spending on health was only some implications from the experience of Jamkesmas around 0.9 percent of GDP in 2011, one of the lowest for public financing of UHC in Indonesia as the country in the world. A key issue will be ensuring adequate looks forward to 2019 and beyond? 2 Government of Indonesia (2013). Roadmap Toward the National Health Insurance of Indonesia: 2012-2019, Jakarta. 3 In 2010, the poverty line was around Rp 211,000 per month or Rp 7,033 per day. Near-poor is defined as 1.2 times the poverty line. In 2010, the near-poor line was around Rp 250,000 per month, or Rp 8,400 per day. The World Bank. 2012. Protecting poor and vulnerable households in Indonesia. Washington, DC: World Bank 2 East Asia and Pacific HNP Brief Series In 2011, the government passed the ground- breaking Badan Penyelenggara Jaminan Sosial (BPJS) Law which stipulated that all existing contributory and non-contributory social health insurance schemes would be merged to pool contributions and provide streamlined uniform benefits under a single-payer umbrella beginning in 2014. Following the institutionalization of the single- payer insurance administrator (BPJS), the government plans to incrementally extend coverage to the entire population by 2019. Therefore, as of 2014, Jamkesmas has been merged and folded under the BPJS umbrella. Jamkesmas: Background & Context In Indonesia’s decentralized context, about half Indonesia embarked on its journey to UHC of all government health expenditures occur beginning in 2004. The universal right to health at the district level. Provincial-level government care was included as an amendment to Indonesia’s health spending is about 15 percent and central-level constitution in 1999. However, the impetus for UHC government health spending is only about 35 percent came a few years later, in a 2004 landmark legislation of total government health spending. Nevertheless, – the Sistem Jaminan Sosial Nasional or the SJSN Law Jamkesmas is financed entirely by the central government – which formed the legal basis for the attainment and managed by the Ministry of Health (MOH) and of several social protection objectives in the country. not by provincial and district health offices. Table 1 Following passage of the SJSN Law, the Indonesian summarizes key financing information on Jamkesmas government introduced the Askeskin program in 2005. including trends in the premium, expenditures, and The program initially targeted the poorest 36 million target membership over the period 2005-2012. As can of Indonesia’s population with an estimated premium be seen from the table, except for in 2011 and 2012, of Rp 5,000 per person per month.4 After six months, Jamkesmas premiums have generally been higher than the target population was increased to 60 million. In expenditure per capita per month. Premiums have 2008, Askeskin was expanded again to also cover the been adjusted over time in order to keep allocations near-poor population; the name of the program was ahead of expenditures. Jamkesmas expenditures have, changed to Jamkesmas and it provided coverage to a on average, represented 28.4 percent of total central target population of 76.4 million, more than a third of government health expenditures over the period 2005- Indonesia’s population. 2011 (Figure 1). 4 The initial budget for Jamkesmas was derived from preliminary actuarial estimates and the experience of the civil servant insurance scheme, Askes. 5 The Askes and P2JK reports data may not capture all Jamkesmas spending, as additional funding could be mobilized from other sources during mid-year budget revision, and some Jamkesmas supporting activities could be funded by units outside of P2JK. 3 East Asia and Pacific HNP Brief Series East Asia and Pacific HNP Brief Series Page 2 What did we learn? Table 1: Jamkesmas target membership, premiums, allocations, and expenditures, 2005-2012 Year 2005 2006 2007 2008 2009 2010 2011 2012 Target 60 60 76.4 76.4 76.4 76.4 76.4 76.4 membership million million million million million million million million Premium per member per Rp 5,000 Rp 5,000 Rp 5,000 Rp 5,000 Rp 6,250 Rp 6,500 Rp 6,500 Rp 6,500 month Total Rp 2.3 Rp 3.6 Rp 3.5 Rp 4.6 Rp 4.6 Rp 5.3 Rp 6.3 Rp 7.2 allocations trillion trillion trillion trillion trillion trillion trillion trillion Total Rp 1.3 Rp 3.5 Rp 3.4 Rp 4.2 Rp 4.5 Rp 4.6 Rp 6.3 Rp 7.1 expenditures 5 trillion trillion trillion trillion trillion trillion trillion trillion Expenditures per member Rp 1,806 Rp 4,861 Rp 3,709 Rp 4,581 Rp 4,908 Rp 5,017 Rp 6,872 Rp 7,744 per month Source: 2005-2007: Askes annual reports 2005, 2006 and 2007; 2008-2010: Pusat Pembiayaan Jaminan Kesehatan (Center for Health Financing and Risk Protection) (P2JK) reports 2010; 2011-2012: P2JK reports 2011, 2012 Main facts (optional) It is important to note that Jamkesmas premiums to be at least three to four times higher than current and expenditures do not reflect the full cost of premium rates, even with existing levels of supply-side provision of needed care, neither from a unit cost constraints.6 Supply-side constraints and supply-side nor from an aggregate utilization perspective (inpatient subsidies taken together with demand-side financing utilization rates remain relatively low for Jamkesmas give the impression that financing of Jamkesmas is members). An estimated two thirds of the cost of care sufficient. However, if the utilization rates were higher for Jamkesmas continues to be subsidized by supply- and supply-side constraints were removed, the actual side government health spending on salaries and costs of the Jamkesmas program would likely be much infrastructure. Actuarial studies estimate the true cost higher. 4 East Asia and Pacific HNP Brief Series Fiscal Space for Jamkesmas: 2005- 2011 Fiscal space for health refers to the ability of a country to increase public spending for health without jeopardizing the government’s long-term financial sustainability.7 Fiscal space for health can potentially be generated from a variety of sources which can broadly be grouped into the following five options:8 (i) A reprioritization of health within the government budget Jamkesmas financing cannot be attributed to (ii) Conducive macroeconomic conditions such reprioritization of health by the central government. as economic growth and increases in overall Health spending as a share of central government government revenue that, in turn, might lead to expenditure over 1995-2011 has remained quite stable, increases in government spending for health averaging 2.3 percent over the 17-year period (Figure 2). (iii) An increase in the efficiency of existing government The average share of health spending was 2.3 percent health outlays if one looks at 1995-2004, the years before Jamkesmas (iv) An increase in health sector-specific resources, e.g., implementation, and it remained at 2.3 percent during through earmarked taxation 2005-2011, the years of Jamkesmas implementation (v) Health sector-specific grants and foreign aid. for which data is available. There is no evidence of reprioritization of health at the central government Of these five options, which was the primary source level on the basis of expenditure-share trend analysis. of fiscal space for Jamkesmas? Given that there are By way of contrast, education spending as a share of no earmarked taxes for health in Indonesia and the central government expenditure has consistently been country’s dependence on external sources of financing higher than that of health’s, and increased from 7.9 is low, options (iv) and (v) were not used for financing percent over 1995-2004 to 10.5 percent over 2005-2011 Jamkesmas.9 This leaves three possible sources of fiscal (the higher allocations to education also reflect the space for central government financing of Jamkesmas more centralized nature of the sector when compared over the period of 2005-2011: (i) a reprioritization of to the health sector). The fuel subsidy share of central health; (ii) a conducive macro-fiscal environment; and government expenditures has generally been even (iii) efficiency gains. Each of these is discussed in turn higher than that of education, and some of the decline below. in the fuel subsidy share post-2004 appears to have benefited education more than it has health (Figure 2). 6 Guerard et al., 2011 7 Heller, P.2006. “The prospect of creating ‘fiscal space’ for the health sector.” Health Policy and Planning, 21(2): 75-79. 8 Tandon, A., and C. Cashin.2009. “Assessing public expenditure on health from a fiscal space perspective.” HNP Working Paper. Washington, DC. 9 While external sources were used to finance the majority of coverage for the poor in some other countries like Laos and Cambodia, only 1.24 percent of Indonesia’s total health expenditure was from external sources on average from 2002 to 2011. The main source of Jamkesmas funding was from the central government budget. 5 East Asia and Pacific HNP Brief Series East Asia and Pacific HNP Brief Series Page 2 What did we learn? Data from the transition period 2004-2006 when sub-items within the central government’s health ex- Jamkesmas was introduced suggests that financing for penditures indicates that spending for Jamkesmas seems the program resulted, at least in part, from a change to have been offset by a contraction of spending under Main facts in priorities (optional) within the central government health-ex- the “medicines and health supply” line item of the cen- penditure envelope. In 2005, when Jamkesmas was in- tral government health budget: which declined from Rp troduced, total central government health expenditures 5,595 billion in 2004 to about Rp 359 billion in 2005 and actually declined compared to 2004 (Table 2). Examining Rp 924 billion in 2006 (Table 2). The introduction and expansion of Jamkesmas been increasing, gross debt levels have declined since 2005 occurred over a period of generally sharply, government deficit levels have been in the good macroeconomic conditions in Indonesia: manageable 1-2 percent of GDP range, and inflation overall government expenditures and revenues have and unemployment rates have been stable and low. 6 East Asia and Pacific HNP Brief Series Economic growth has been robust: averaging almost 6 percent per year over the period 2005-2011 in real terms and 18 percent per year in nominal terms (Figure 3). Expenditure decomposition analysis indicates that government expenditure remained almost the same. the rise in nominal terms in central government Within the total central government health spending health spending over the period 2005-2011 envelope, the rise in Jamkemas expenditure is largely occurred largely as a result of rising GDP, rather attributable to the increase in Jamkesmas’s share of than an increase in central government spending as the central government health expenditure (from 22.1 a share of GDP or an increase in health spending as a percent in 2005 to 44.6 percent in 2011). Therefore, share of the central government expenditures (Table it appears that financing of Jamkesmas resulted from 3). Comparing 2011 with 2005, central government generally conducive macro-fiscal conditions and a certain expenditure as a share of GDP actually decreased by amount of reallocation within the central government 2.3 percent, and health spending as a share of central health-budgetary envelope. 7 East Asia and Pacific HNP Brief Series East Asia and Pacific HNP Brief Series Page 2 What did we learn? Jamkesmas premiums have been adjusted over forward, the macroeconomic conditions in Indonesia time to account for rising expenditures under the may be less conducive. In spite of a sound macroeconomic program. In 2007, the use of services by Jamkesmas policy framework and Indonesia’s strong current beneficiaries increased significantly, especially inpatient macroeconomic and fiscal position, the weakened services, while the program was budgeted historically global economy is expected to dampen growth (IMF based on the use of funds from the previous year. 10 2012 Article IV). The World Bank has estimated that the This caused a financial shortage and the MOH had to country’s GDP growth in 2013 was 5.9 percent, lower than reallocate its budget, leading to delays in hospital the 6.2 percent as previously projected in the December reimbursements. This received wide media attention 2012 Indonesia Economic Quarterly. The deficit has and led to some changes (including the transfer of been revised upwards from 0.7 percent to 2.4 percent of administration from PT Askes to MOH) and some GDP, due to lower projected nominal revenues, in line additional cost-containment measures such as the with weaker anticipated GDP growth, and higher total introduction of a drug formulary and diagnostic-related expenditure. For 2014, growth is expected to pick up group (DRG) payments. However, no effort has been to 6.2 percent, but the medium-to-long-term economic made yet to assess to what extent the latter interventions outlook remains modest.11 Given the estimate of the improved the efficiency of Jamkesmas outlays, which central government-financed BPJS premium of Rp Main facts (optional) resulted, in effect, in the creation of additional fiscal 19,225 per person per month and a target population room for the program’s implementation. of 86.4 million, the central government’s contribution to BPJS would equal Rp. 19.9 trillion. The current Implications for Fiscal Space for UHC estimated central government health budget is Rp. 44.9 trillion.12-13 This implies that almost half of the entire Analysis of budget and expenditure data suggests central government health budget would be used up to that Jamkesmas financing was largely a result finance BPJS in 2014.14 This would significantly lower the of conducive macro-fiscal conditions and some share of financing of other areas of central government reallocation of expenditures within the central health spending, including salaries and operating government health-expenditure envelope. There is costs for centrally-financed hospitals, investments in no evidence of reprioritization of health relative to other improving supply, and much-needed preventive and sectors during the period of Jamkesmas introduction promotive interventions. A combination of central and expansion of 2005-2011. government reprioritization of health, efficiency gains, possible earmarked tobacco taxes, and subnational The modality that was used to finance Jamkesmas complementary financing will likely be needed to is unlikely to be sufficient as Indonesia looks effectively finance attainment of UHC in Indonesia. forward to attainment of UHC by 2019. Looking 10 The spike in inpatient service utilization was mainly due to program maturation (more became aware of the program’s benefits) and the absence of cost-containment measures (drug formulary, member verification, and so forth). 11 Indonesia Economic Quarterly, July 2013 12 Perpres 2013 13 Actual central health budget may be less than the estimated Rp. 44.9 trillion. Assuming the nominal GDP is Rp 11,011.4 trillion as per IMF forecasts, and the central government expenditure as share of GDP in 2014 is the average it has been over 2005-2011 (i.e., 12.3%), if the central government expenditure remains 12.3 percent of GDP, and health remains at around 2.3 percent of central government expenditure, the central government health budget would equal to Rp 31.2 trillion in 2014. 14 Fiscal space might be expanded by potential additional funding from the premium contribution of formal workers if the mandatory insurance is in place (currently uncovered formal workers estimated to be 11.8 percent of general population, see Annex 1). 8 East Asia and Pacific HNP Brief Series Some reprioritization of public spending to make more funds available for health in Indonesia can be justified on several grounds. First, Indonesia has underinvested in human capital, and continued future growth will rely on more investment in health and education (IMF 2012 Article IV). Currently 45 percent of the population is under 25, and to maximize the future impact of this “demographic dividend”, greater investment in health and education will be required to increase productivity as this population cohort ages. Second, reduction in fuel subsidies could be a source of fiscal space for health in Indonesia. Spending on fuel subsidies was estimated to be 3 percent of GDP in In conjunction with reprioritization of health, 2013 (IMF 2012 Article IV). The large share of the central there may be other options that can be considered government budget that goes to fuel subsidies primarily in order to realize fiscal space for UHC in Indonesia. benefits the richer segments of Indonesia’s population. Although the dominant financing source for BPJS is The World Bank (2011) reported that the top 50 percent from the central government, in future, complementary of households by income consumed 84 percent of subnational financing could help cover contributions subsidized gasoline, whereas the lowest 10 percent of of those who are non-poor in the informal sector (as households by income consumed less than 1 percent of implementation of current UHC programs in Aceh, Bali, subsidized gasoline. A large share of the subsidy goes to 15 and Jakarta could be a potential model to consider).16 fuel private vehicles of relatively high-income households. However, the limited information on local schemes has Reducing fuel subsidy expenditure with reallocations to led to lack of knowledge on how much the contribution health to finance BPJS implementation would signal a would be and how it would be done. clear shift towards pro-poor spending for Indonesia. Earmarked taxation of alcohol and tobacco could Third, some reprioritization for health in Indonesia be another way of revenue generation (see Box is also merited from an international benchmarking 1). However, there appear to be political obstacles to perspective. In 2011, public spending on health in Indonesia taxing tobacco in Indonesia, and tobacco taxation is across all levels of government was US$32 per capita, only often regressive and may result in evasion and the about 0.9 percent of GDP. This is the third-lowest health- development of an underground market. Furthermore, spending-to-GDP ratio in the world – only Myanmar and although earmarked taxes can help add to fiscal space, Pakistan have lower public spending ratios – and this is also they may also displace existing funding and thereby end one reason why out-of-pocket (OOP) spending remains up having no significant impact on overall resources for high in the country despite rising coverage (Figure 4). health.17-18 15 World Bank. 2011. Indonesia Economic Quarterly: Current Challenges, Future Potential. Washington, DC: World Bank 16 Informal sector non-poor estimated to account for 17.7% of the population (see Annex 1). 17 The World Bank. January 2001. “Giving more weight to health: assessing fiscal space for health in Indonesia”. Washington, DC: World Bank. 18 Schieber, G., et al. 2012. Health Financing in Ghana World Bank. Washington, DC: World Bank. 9 East Asia and Pacific HNP Brief Series East Asia and Pacific HNP Brief Series Page 2 What did we learn? Box 1. Sin Taxation for Financing UHC in the Philippines opportunity provided to the manufacturers to misdeclare Context and Rationale higher-priced brands as lower-priced brands.25 In 2010, out of more than PHP 822 billion total revenue collected by the Tobacco and alcohol excise tax rates in the Philippines are country, PHP 21.8 billion and PHP 31.7 billion came from among the lowest in Asia and the world.19 This may be one alcohol products and tobacco products, respectively.18 factor that explains why the country has one of the highest smoking rates and the second most consumers of alcohol Sin Tax Reform in Southeast Asia. The Philippines is home to an estimated 17.3 million tobacco smokers, with 1,073 cigarette sticks The Republic Act 10351 (also known as the Sin Tax Reform being consumed per capita annually; 38.9 percent of its 2012) was signed in to law in December 2012 with the population are occasional alcohol drinkers, and 11.1 percent objective of restructuring the excise tax on alcohol and of the population are regular alcohol drinkers.20-21-22 Tobacco tobacco and generating government revenue to finance and alcohol consumption in the Philippines has significant expansion of UHC. Major features of the Sin Tax Reform social and economic consequences: the WHO estimates that 2012 include a gradual shift from a multi-tiered tax structure 10 Filipinos die every hour from cancer, stroke, and lung to a more unitary and specific tax structure (to keep and heart diseases caused by cigarette smoking, while the manufacturers and consumers from downshifting to lower- country loses nearly PHP 500 billion annually due to the costs taxed brands and to under-invoiced products, and to achieve of healthcare and productivity losses resulting from cigarette more predictable revenue and easier tax administration); an and alcohol Main consumption. facts (optional) 23 automatic tax rate increase of 4 percent annually for distilled spirits effective 2016, and for cigarettes and beer effective Since the 1980s, various legislations have been enacted on 2018 (to prevent inflation erosion); proper tax classification sin taxes in the Philippines. With the enactment of Republic of tobacco and alcohol products to be determined every two Act 8240 in 1996, the Philippines introduced a multi-tiered years (to remove the price classification freeze); adherence to schedule for excise tax on tobacco and alcohol products the WTO’s ruling on distilled spirits and the WHO Framework based on the net retail price (exclusive of VAT) of each brand, Convention on Tobacco Control’s commitment on cigarettes; with cheaper brands being taxed less than more expensive and earmarking of incremental revenues (to augment the brands. The Republic Act No. 9334 which took effect in funds of the UHC program and provide tobacco farmers with 2005 mandated varying rates of increases for all brands of livelihood support). Out of the PHP 33.96 billion additional cigarettes and alcohol products every two years, until 2011.24 revenue expected to be generated in the first year of reform However, the multi-tiered tax system contributed to the implementation, PHP 23.4 billion (69%), PHP 6.06 billion deterioration of the excise tax effort and resulted in the (18%), and PHP 4.5 billion (13%) are expected to come erosion of excise tax revenues. Studies showed that rather from cigarettes, distilled spirits, and fermented liquors, than discouraging the use of tobacco and alcohol products, it respectively.26 It has been reported that the sin tax collection actually encouraged a downshifting of both manufacturers has reached PHP 21.75 billion (US$504.2 million) within and consumers to cheaper brands. From 1997 to 2011, the the first four months of 2013, which is a nearly 25 percent excise tax revenues as share of GDP dipped by almost half increase compared with same period in 2012, despite the fact for both tobacco and alcohol products. The primary reasons that there has been an increase in smuggling and unreported for the decline include the inadequate adjustment of specific production following the excise tax increases. 27 tax rates to inflation, price classification freeze, and the 19 Nakayama, Kiyoshi, Selcuk Caner, and Peter Mullins. Road Map for a Pro-Growth And Equitable Tax System. IMF Country Report No. 12/60. 2011 20 DOH. March 16, 2010. Philippines GATS Country Report. 21 http://www.gov.ph/sin-tax/ 22 www.ihra.net/files/2010/05/02/Presentation_23rd_M10_Labajo.pdf 23 http://newsinfo.inquirer.net/61111/smoking-kills-1--filipinos-every-hour 24 Albert, Jose Ramon G. November 2012. “What Is So Sinful About The Sin Tax?”. http://www.nscb.gov.ph. 25 Manasan, Rosario G., and Danileen Kristel C. Parel. February 2013. “Amending the Sin Tax Law”. Philippine Institute for Development Studies. Discussion Paper Series No. 2013-19. http://www.gov.ph/sin-tax/ 26 http://www.ugnayan.com/ph/gov/PCOO/article/2S8T 27 http://www.tax-news.com/news/Philippines_Sin_Tax_Revenues_Benefit_From_Reform____61282.html 10 East Asia and Pacific HNP Brief Series Impacts for UHC budget by 43 percent,28 which equals approximately PHP 515.9 billion. Additional revenues generated from the Out of the PHP 682.1 billion estimated total cost of UHC sin tax will be prominent sources for the financing of the from 2012 to 2016, PHP 224.8 billion (33 percent) falls under UHC program. While the progress of sin tax reform seems the national government’s financing requirement. The promising, concerns regarding its funding of UHC have been current budget for the UHC program for the period 2013- highlighted. Some argue it might be better to have protected 2016 is PHP 360.8 billion, which accounts for 64 percent of funding from general revenues rather than a dependence on the DOH’s target fund of PHP 565.2 billion. Figures show the continuation of harmful behavior to finance UHC.29 that the sin tax revenue could expand the government Other earmarked taxes could be explored as a pharmaceutical expenditures comprising about 30 source of fiscal space for health in Indonesia. Some percent of total health sector spending in any given countries such as Ghana have earmarked VAT taxes for the year, saving more than half of that amount by improving financing of UHC. The revenue from the VAT earmark has diagnosis will yield resources that can be used to extend been shown to be a highly stable and progressive revenue and improve services for all Indonesians.31 Other areas source in Ghana (Schieber et al. 2012).30 While increasing of potential savings would be reductions in unnecessary revenues via additional contributions or through hospital admissions and improvements in provider additional earmarked taxes may ease fiscal constraints payment mechanisms. In addition, efficient allocations for UHC, the way in which revenues are raised is crucial: of government health expenditures within the overall regressive, inefficient, and excessive taxes can do more envelope are also important as is the extent to which harm than good to the overall economy. Developing some public financing for health is pro-poor in its outlays.32 of these options would require additional background Even leaving out the issue of health having multisectoral analyses, and detailed discussions of the pros and cons of determinants – and that governments may choose to each of the options. improve health by investing in other sectors such as sanitation, education, infrastructure, or in economic It is also important to note that increasing growth more generally – what matters is where and how resources is only one part of the overall picture. public spending on health is spent, not just how much. Increased resources will not solve Indonesia’s health system problems if the additional expenditures do not Further analysis would be useful to support the translate into improvements in health outcomes and Government of Indonesia in weighing the options for enhanced financial protection. Improved efficiency in generating sufficient fiscal space to achieve its universal the use of existing resources (for example by designing coverage goals. Suggested analysis, prioritizing the most intergovernmental fiscal transfers that are geared critical bottlenecks and sources of fiscal space with the towards attainment of health outputs and/or outcomes) greatest potential, would focus on: could also be considered as part of the overall health financing and fiscal space agenda for UHC. Several (i) Priority setting in government spending: A detailed options are available to improve efficiencies: with assessment of the budget process to understand how 28 http://www.gov.ph/sin-tax/ 29 https://www.devex.com/en/news/philippines-eyes-universal-health-care-law-now-what/81373 30 Akazili, J., J. Gyapong, J., and D. McIntyre. 2011. “Who pays for health care in Ghana?” International Journal for Equity in Health 10:26. 31 Based on unpublished analysis and estimates of Professor David Dunlop, University of Indonesia, May 2013 32 Tandon, A. 2007. “Measuring government inclusiveness: an application to health policy.” Asian Development Review 24: 32-48. 11 East Asia and Pacific HNP Brief Series East Asia and Pacific HNP Brief Series Page 2 What did we learn? priority setting happens in practice and where rigidities efficiency gains from the strengthening of these may be inhibiting funding allocations from reflecting payment systems’ focus on primary care and the government priorities and commitments to the health limiting of overuse of high-cost services may sector, such as the civil service wage bill, pensions, and include: (i) analysis of the share of insurance other new spending priorities on the horizon. payments made to primary, secondary, and tertiary (ii) Subnational revenue sources: Mapping of funds flows to care to possibly inform benchmarking for increasing health at the subnational level and deeper case studies allocation to primary care; (ii) analysis of the rate of of current UHC programs in Aceh, Bali, and Jakarta. potentially avoidable hospitalizations for primary (iii) Efficiency gains from strategic purchasing and care-sensitive conditions; and (iii) analysis of drug provider payments: Current provider payment prices and reimbursement relative to international systems in the Jamkesmas program are being benchmarks and neighboring countries. adapted for use in BPJS. An analysis of potential   Annex 1. Population distribution , Susenas 2011. Category Frequency* Percentage Insured Jamkesmas 51,903,131 21.5% Main facts (optional) Askes 22,550,390 9.4% Jamsostek 19,929,312 8.3% Private 10,499,020 4.4% Other 7,540,023 3.1% Sum Any Insurance (W/O Double Counting) 102,884,603 42.7% Non-insured Formal-urban 16,094,070 6.7% Formal-rural 12,329,062 5.1% Sum Formal 28,423,132 11.8% Informal-poor/near-poor (1st & 2nd hhquintile) 40138238 16.6% Informal-non-poor (3rd-5th hhquintile) 42782860 17.7% Sum Informal 82921098 34.4% Other (Minors) 26,907,202 11.2% Sum Non-insured 138,251,432 57.3% Sum Total 241,136,035 100.0% Note: *Individual-weighted The World Bank About this Series: 18181 H Street NW East Asia and Pacific Health Matters are preparedly by the Health, Nutrition and Population Washington DC, 20433 USA Sector in East Asia and Pacific on the World Bank drawing on completed or ongoing project and Tel: (202) 458-1876 research. The notes, however, are not peer reviewed. They do not represent the official position Fax: (202) 522-1557/1560 of the World Bank Group. For more information, please contact xbi@worldbank.org www.worldbank.org/health 12