The history of SHI expansion in Indonesia

Early reform: the promise of economic growth in the post-independence era (1945-1992)

The health system in Indonesia was first established by the Dutch colonial government in the early 20th century. Askcs (Health Insurance for Civil Servants), one of the earliest SHI schemes, was started in 1945, after Indonesia attained national independence. It carried the colonial legacy of providing mandatory health insurance for civil servants with a comprehensive package of free health services, mandating 2% monthly salary contribution from the members (Rokx, 2009). Subsequently, Askcs Persero (Health Insurance for the Police and Militaries) was established in 1968. This SHI scheme was targeted at both active and retired military personnel and their dependents (Rokx, 2009; Thabrany et al., 2003).

The New Order government in Indonesia led by President Suharto from 1967 to 1996 ushered in unprecedented economic growth, with massive investment in the public sector and public infrastructure in the early years of his leadership. These initial economic achievements were bolstered by two oil booms in the 1970s (Suryahadi et al., 2014). The annual average growth rate of real GDP in Indonesia from 1970 to 1995 was reported at 6.7% - outwardly satisfactory for a middle-income country. However, critics opined that this seemingly impressive growth concealed structural weaknesses inherent within the Indonesian economy, such as the constant capital outflow due to financial liberalization and average annual inflation of 10% in the same period (Francis, 2012).

Following Askcs and Askcs Persero, Jamsostek (Worker’s Social Security) was introduced in 1992 to provide health insurance and other social security measures - such as work-accident insurance, death benefits, and old-age savings - to formal sector workers (Suryahadi et al., 2014). The mandatory contributions for Jamsostek

came entirely from the employers and amounted to 3% of salary for single employees and 6% for married employees.

Rollback of reform: Asian financial crisis and economic downturn (1997-1999)

The contagion of the Asian financial crisis that first hit Thailand in 1977 affected many other Asian countries including Indonesia, resulting in the worst economic performance in the country’s history. Indonesia experienced a GDP growth of-13.1% in 1998, and its national budget turned from surplus in the early 1990s to deficit post-crisis (Francis, 2012). This situation was compounded by other unexpected negative impacts, including the devaluation of the Indonesian currency six times in less than a year, a sharp rise in the unemployment rate, and soaring inflation. The downturn in the Indonesian economy during this period had a serious impact on the economic conditions of average households and reduced most low-income households to a state of extreme poverty virtually overnight (Suryahadi et al., 2014; Waters et al., 2003). The incidence of absolute poverty ballooned from 11.3% of the total population in 1996 to 23.3% in 1999 (Francis, 2012).

In the immediate aftermath of the crisis, an empirical analysis of the impacts of the Asian financial crisis on healthcare in Indonesia showed that household expenditure on health had decreased markedly both in absolute terms and in terms of percentage of overall spending, largely due to the increased costs of imported drugs and treatment costs in governmental health centers. The public health system had also been seriously hit by reductions in public healthcare expenditure as government budgets for healthcare shrank (Waters et al., 2003).

A groundswcll of discontent caused by the pervasive negative impacts of the currency devaluation gradually manifested in increasing opposition to the dictatorship of the New Order regime, creating waves of political unrest and civilian demonstrations that eventually paved the way for the downfall of President Suharto in 1998 (Suryahadi et al., 2014).

Extension of reforms: democratic transition and social health insurance expansion (1998-2013)

The downfall of Suharto ushered in a democratic transition in Indonesia as new actors who had campaigned heavily for reform emerged in the policy arena. In the battle to woo voters and secure political support, politicians resorted to electoral populism, with promises of social welfare expansion, better social services provision, free healthcare, and free education becoming dominant narratives in most of the electoral campaigns at that time (Aspinall and Warburton, 2013).

The first major wave of reforms took place in 2004 when the newly elected President Susilo Bambang Yudhoyono’s government introduced a free and basic healthcare program, known as Askeskin (Health Insurance for the Poor), to be rolled out at the national level. It was intended to expand health insurance coverage to low-income citizens who were largely reliant on the informal sector (Aspinall, 2014). The financing of Askeskin was substantially different from the earlier SHI schemes as the premiums were entirely financed from public revenues (Suryahadi et al., 2014). The fiscal commitment to such an enormous welfare expansion arguably held the key to Yudhoyono’s rise during his campaign, from electoral underdog to popular leader (Aspinall, 2014). In 2008, Askeskin was converted into a new SHI scheme known as Jamkestnas (Suryahadi et al., 2014).

In addition to Jamkestnas, which was administered by the central government, the inception of decentralization in 2001 that endowed local governments in Indonesia with higher fiscal and administrative autonomy also resulted in the flourishing of local health insurance schemes known as Jamkesda', these were intended to cover parts of the populations that were not covered under Jatnkes-tnas (Trisnantoro et al., 2014). The concurrent existence of Jamkestnas and Jamkesda enabled more poor households to be included in SHI schemes.

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