02.02.01. How is the health system financed? | Indonesia

02.02.01. How is the health system financed? | Indonesia

13 Apr 2022

The NIHS/BPJS is a single quasi-government entity and the biggest single-payer system globally (Agustina et al., 2019, pp.76,88). The system is financed from three sources. First, contributing members pay insurance premiums. Second, for non-contributing members the insurance premiums are covered by the government of Indonesia. Third, additional revenue is received from income tax, tobacco tax, district-level payments as well as grants from overseas development agencies (Agustina et al., 2019, p.88). However, a World Bank report maintains that despite reform, out of pocket spending for health continues to be one of the main financing mechanisms of the health care system (World Bank, 2016b, p.4).

The NIHS/BPJS system contracts primary care providers as well as hospital providers directly. Primary care providers are paid through a capitation system and advance payments, while secondary providers (hospitals) are reimbursed through diagnosis-based group (CBG) tariffs allocated by the Ministry of Health (Agustina et al., 2019, pp.76,88). The direct contracting system enabled the NHIS to enrol 20,000 primary care providers, 907 public and 1,106 private hospitals as well as pharmacists, dispensaries, laboratories, and radiology centres (Agustina et al., 2019, p.89).

In terms of allocation of funding, it is clear that political emphasis lies on curative and rehabilitative care. The largest share of health expenditure accounts for hospital care (over 65%), with approximately 50% financing in-patient and 15% percent financing outpatient care. A further 20% of health expenditure support care in the Puskesmas and in private clinics. Less than one per cent of the budget are allocated for prevention and health promotion (World Bank, 2016b, p.5).


Agustina, R., Dartanto, T., Sitompul, R., Susiloretni, K. A., Suparmi, Achadi, E. L., Taher, A., Wirawan, F., Sungkar, S., Sudarmono, P., Shankar, A. H., Thabrany, H., Susiloretni, K. A., Soewondo, P., Ahmad, S. A., Kurniawan, M., Hidayat, B., Pardede, D., Mundiharno, … Khusun, H. (2019). Universal health coverage in Indonesia: concept, progress, and challenges. The Lancet, 393(10166), 75–102. https://doi.org/10.1016/S0140-6736(18)31647-7

World Bank. (2016b). Indonesia Health Financing System assessment: spend more, spend right & spend better. Available at: http://documents.worldbank.org/curated/en/453091479269158106/pdf/110298-REVISED-PUBLIC-HFSA-Nov17-LowRes.pdf