Health spending, utilization and Health spending, utilization and governance in decentralized Indonesiagovernance in decentralized Indonesia

Robert Sparrow and Menno PradhanRobert Sparrow and Menno Pradhan

Decentralization in IndonesiaDecentralization in Indonesia

Big Bang in 2001.Big Bang in 2001. Transfer of functions to over 300 districts, Transfer of functions to over 300 districts,

including health.including health. High variations in General Block Grants High variations in General Block Grants

allocated to districts.allocated to districts.• In part as a result of national resource sharingIn part as a result of national resource sharing• Highest per capita transfers 50 times that of Highest per capita transfers 50 times that of

lowest per capita transferslowest per capita transfers

Decentralization in Health SectorDecentralization in Health Sector

Central/Local public health Central/Local public health expenditures=0.72expenditures=0.72

Freedom in prices, contracts and choice of Freedom in prices, contracts and choice of public services.public services.

Restricted in civil service contracts, civil Restricted in civil service contracts, civil service health insuranceservice health insurance

Weak coordination between central and Weak coordination between central and local public expenditures – no clarity of local public expenditures – no clarity of functions, overlap in many instancesfunctions, overlap in many instances

Planned ‘minimum service standards’Planned ‘minimum service standards’

Objectives of this studyObjectives of this study

Describe patterns of Governance and Describe patterns of Governance and public spending in health sector since public spending in health sector since decentralizationdecentralization

Data sourcesData sources• Governance and Decentralization Survey 2002Governance and Decentralization Survey 2002• Susenas surveysSusenas surveys• Fiscal data Fiscal data • Health clinics survey from 1999Health clinics survey from 1999

Participation of PUSKESMASParticipation of PUSKESMAS

0 1 2 3 4 5

Budgetallocation

Programformulation

Cost setting

Procurement

Degree of participation

According to Dinas

According topuskesmas

Low correlation between district and Puskesmas answer

Participation of CommunityParticipation of Community

0 1 2 3 4 5

Budgetallocation

Programformulation

Cost setting

Procurement

Degree of participation

According to Dinas

According topuskesmas

correlation between district and Puskesmas answer (except budget)

Participation of CommunityParticipation of Community

0 10 20 30 40 50

Attended meeting

Atttended meeting and participated

Attended meeting and took role indecision making

Contrubuted to health program

Percent

According tocommunity

Transparency in health sectorTransparency in health sector

0 1 2 3 4 5

Health programformulation

transparent andinvolves

puskesmas

Health sectorbudget allocation

is transparent

Procurement isconducted fairly

Degree of agreement

According to Dinas

According topuskesmas

Low correlation between district and Puskesmas answer

Rule of law in health sectorRule of law in health sector

0 20 40 60 80 100

Medicine theft

Abuse of powerby bureaucrats

Disciplicaryviolation

Malpractice byhealth

practitioners

Has

hap

pen

ed in

pas

t ye

ar?

Percent

According to Dinas

According topuskesmas

Low correlation between district and Puskesmas answer (except medicine theft)

Governance indicatorsGovernance indicators

Factor analysis used to reduce to Factor analysis used to reduce to single variable forsingle variable for• PuskesmasPuskesmas• Dinas officials Dinas officials • HouseholdsHouseholds

Regional variation in public and Regional variation in public and private health expendituresprivate health expenditures

0

20000

40000

60000

80000

100000

120000

140000

Riau

Bali

Kalimanta

n Tim

ur

Kalimanta

n Tim

ur

Nanggroe

Ace

h Dar

ussala

m

Papua

Bali

Sumat

ra B

arat

Sulawes

i Uta

ra

Kalimanta

n Ten

gah

Yogyaka

rtaRia

u

Kalimanta

n Ten

gah

Jawa

Tim

ur

Jawa

Tengah

Jawa

Tim

ur

Jam

bi

Sulawes

i Tenga

h

Kalimanta

n Bar

at

Kalimanta

n Sela

tan

Bengkulu

Sulawes

i Tengg

ara

Sumat

ra U

tara

Bengkulu

district government

Private

Private / Public health spendingPrivate / Public health spending

One percent increase in public health One percent increase in public health expenditure leads to a expenditure leads to a • -0.11% percent decrease in private -0.11% percent decrease in private

health expenditurehealth expenditure Gini coefficient ofGini coefficient of

• District public health spending District public health spending 0.360.36• Private health care spendingPrivate health care spending 0.300.30• Total health care spendingTotal health care spending 0.250.25

Determinants of public health Determinants of public health spendingspending

One percent increase in local One percent increase in local government revenue leads to a government revenue leads to a • 0.8% increase in routine expenditures0.8% increase in routine expenditures• 1.2% increase in development expend.1.2% increase in development expend.• 0.8% increase in total expenditures0.8% increase in total expenditures

Determinants of public health Determinants of public health spending .. Cont.spending .. Cont.

Source of government revenue Source of government revenue matters for spending allocations.matters for spending allocations.• Regional tax and tax sharing increase Regional tax and tax sharing increase

development expendituresdevelopment expenditures• Retribution (user fees) increases routine Retribution (user fees) increases routine

expendituresexpenditures• In 2001, lack of equipment in Puskesmas In 2001, lack of equipment in Puskesmas

led to higher than expected public health led to higher than expected public health care expenditurescare expenditures

Prices at health providersPrices at health providers

One percent increase in health One percent increase in health expenditures leads to expenditures leads to • 0.25% decrease in prices charged at 0.25% decrease in prices charged at

PUSKESMAS in 2001PUSKESMAS in 2001• Better governance according to DINAS Better governance according to DINAS

strengthens thisstrengthens this• Better governance according to households Better governance according to households

weakens this relationshipweakens this relationship Little impact of local government policies Little impact of local government policies

on private prices – only increased routine on private prices – only increased routine expenditures leads to lower private prices.expenditures leads to lower private prices.

Utilization of health providersUtilization of health providers

One percent increase in public health One percent increase in public health spending leads to spending leads to • 0.025 increase in public visits (pp per month)0.025 increase in public visits (pp per month)• -0.012 decrease in private visits-0.012 decrease in private visits

Development expenditures are more Development expenditures are more important in decreasing private visits while important in decreasing private visits while routine expenditures have greater effect in routine expenditures have greater effect in increasing public visitsincreasing public visits

More spending on travel leads to higher More spending on travel leads to higher share of public visits.share of public visits.

Satisfaction of householdsSatisfaction of households

High satisfaction 40% ok, 43 % goodHigh satisfaction 40% ok, 43 % good 40% reports services improved at 40% reports services improved at

puskesmas since decentralizationpuskesmas since decentralization More public expenditure is More public expenditure is

associated with higher levels of associated with higher levels of satisfactionsatisfaction

ConclusionConclusion

Perceptions of governance vary widely Perceptions of governance vary widely across stakeholders and have little across stakeholders and have little relationship to public expenditure relationship to public expenditure allocations.allocations.

High variation across districts in district High variation across districts in district health spending.Private spending reduced health spending.Private spending reduced inequality in public health care inequality in public health care expendituresexpenditures

Higher spending by districts has led to Higher spending by districts has led to lower public prices, substitution away from lower public prices, substitution away from private services and increasedprivate services and increased