Health Policy 77 (2006) 247–259

Surviving decentralisation?
Impacts of regional autonomy on health service
provision in Indonesia
Stein Kristiansen a,∗ , Purwo Santoso b,1
a School of Management, Agder University College, Servicebox 422, 4604 Kristiansand, Norway
b Faculty of Social and Political Science, Gadjah Mada University, Bulaksumur, Yogyakarta 55281, Indonesia

Abstract

The paper aims to assess the impacts of decentralisation and privatisation reforms on access to and quality of health services
in Indonesia. The research draws on qualitative and quantitative data from interviews, focus group discussions, and household
surveys in four selected districts. The main conclusions are three-fold; the local administration of health care services is without
transparency and accountability, health centres are turned into profit centres, and the increasing roles of private actors tend to
reduce concerns over preventive health care and the conditions for poor people. Our policy recommendations include increased
government spending to maintain public efforts in environmental and preventive health and in maintaining a minimum health
service for the poor.
© 2005 Elsevier Ireland Ltd. All rights reserved.

Keywords: Devolution; Preventive health; Privatisation; Transparency; Profitability

1. Introduction impact on health indicators such as infant mortality and

Indonesia improved its health care system sub-
stantially under the authoritarian regime of President
Suharto, especially in the 1970s and 1980s. District
hospitals and sub-district health centres were estab-
lished throughout the country, resulting in a remarkable
∗ Corresponding author. Tel.: +47 38 14 15 21;
fax: +47 38 14 10 27.
E-mail addresses: Stein.Kristiansen@hia.no (S. Kristiansen),
psantoso@ugm.ac.id (P. Santoso).
1 Tel.: +62 274 56 33 62; fax: +62 274 56 33 62.
life expectancy. The system was highly centralised with
the main financial and policy making responsibilities
at central government level, in Jakarta. Administrative
and operational functions were delegated to the second
and third layer of the five-tier government hierarchy,
i.e. to the 32 provinces and 440 districts. Below the
districts (kabupaten/kota) are the sub-districts (keca-
matan) and the villages (desa). In this country of 220
million people, the average population of a district is
500,000 and a typical village has 3000 people.
Since 2001, the administration of health services in
Indonesia has changed dramatically. Managerial and

0168-8510/$ – see front matter © 2005 Elsevier Ireland Ltd. All rights reserved.
doi:10.1016/j.healthpol.2005.07.013
248 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
financial responsibilities for public health care have
been decentralised from the central government to the
district level, and health care is increasingly privatised.
The reform followed the severe economic crisis that
began in 1997, the fall of the Suharto regime in 1998,
and the introduction of free elections and democratic
governance in 1999. The central government had an
urgent need to reduce expenditure, and a new polit-
ical ideology saw advantages in bringing power and
responsibility closer to the people. Dominating inter-
national organisations such as the World Bank and the
International Monetary Fund (IMF) strongly pushed
for reforms in the direction of devolution and privatisa-
tion. Private insurance companies were eager to expand
their markets, and deregulation was in tune with global
free trade ideology and agreements. The promoters of
the reform expected to see the combined results of qual-
ity improvement and cost reduction in public service
delivery in general, including health. However, social
and geographical disparities in access to and quality
of health services have been high and now seem to be
on the increase. A dramatic reduction in public health
spending in most places leaves an increasing burden on
families and it facilitates a return to traditional medicine
and healers for the poor.
In this research, our main objective is to trace the
impacts of the 2001 decentralisation reforms on access
to and quality of health care in Indonesia. More specif-
ically, we investigate the administrative impacts of the
decentralisation, the change in quality of health care as
perceived by users, and the costs of health care placed
on households. In this paper, decentralisation is taken
to mean a rather dramatic devolution, whereby respon-
sibilities for funding, as well as quality control in the
health sector are delegated from the central government
to district authorities and private institutions. Four loca-
tions have been selected for study. They are districts
characterised by different levels of per capita income
and geographical centrality. The research methodol-
ogy combines a qualitative approach based on in-depth
interviews and focus group discussions with surveys
and quantitative data from the household level in the
four selected districts.
The paper is organised in six sections. After this
introduction (Section 1), there is an overview of the
development of health and health care systems in
Indonesia since the withdrawal of the Dutch colonial
power in 1949. Thereafter, we discuss decentralisation
of public services in general and critically consider the
expected benefits of deregulation and devolution of the
health sector in a context characterised by poverty and
weak civil society institutions. The research methodol-
ogy is expounded in Section 4, followed by the presen-
tation and discussion of empirical findings in Section 5.
Our conclusion and a brief discussion of policy impli-
cations (Section 6) close the paper.
2. Conditions of health and systems of health
care in Indonesia
At the dawn of independence in 1950, Indonesia
had a population of 72 million and the country only
had 1200 medical doctors. Infant mortality was 200
per thousand and life expectancy at birth was 48 years
[1]. Regional health centres were still unknown and
hospitals and clinics were only available in the larger
cities. Most people used traditional medicines and heal-
ers (dukun) to treat their illnesses. During the 1950s,
some improvements were made, especially in setting
up maternal and child clinics, but progress was lim-
ited due to slow economic development and political
instability.
The concept of community health centres
(puskesmas, Pusat Kesehatan Masyarakat) was
introduced in 1968. They were supposed to be avail-
able in every sub-district and a public referral hospital
should be located within each district. Full national
coverage of this system was achieved 20 years later. At
least one puskesmas is generally available per 30,000
people, and additional sub-health centres (pustu)
can be accessed at the village level. A mandatory
government service for newly graduated physicians
ensured doctors availability at most puskesmas.
Nurses or midwives are responsible at the village level
centres. Emphasis has been put on environmental and
preventive health care. The main tasks of puskesmas
have been antenatal and postnatal care, immunisation,
family planning services, nutrition and sanitation
consultations, and dental services. Pustu help to
improve the quality and outreach of puskesmas
services at lower levels of centrality. Affordable access
to modern basic health services for all was a primary
national policy objective in the Suharto era and a
means to legitimise the centralised and authoritarian
regime. Research has proven that especially water and
 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
sanitation schemes brought a substantial reduction in
mortality, at low public and private costs [2].
Health service fees charged to users were set low.
The objective was to limit the financial barriers to
improved health for all, especially in rural and periph-
eral areas. Health was subsequently improved. Infant
mortality reached 48 per thousand in 1995 and life
expectancy rose to 65 years. Between 1980 and 1997,
death rates in children younger than 5 years fell by 40%
[3]. However, at the beginning of the economic crisis
in 1997, the health status of Indonesia still lagged far
behind neighbouring countries. Maternal mortality was
particularly high and more than 20,000 women died
annually during pregnancy and delivery [4]. The high
number of maternal deaths was a particular problem
in rural areas, due to the limited access to delivery by
skilled midwives. Considerable regional disparities in
health qualities existed even before the decentralisation
reform. For example, the infant mortality rate ranged
from 27 per thousand live births in Jakarta to 90 in the
province of Nusa Tenggara Barat in 1998 [4].
Cost recovery of public health care facilities used
to be low before decentralisation, being around 15%.
In spite of this, data from Susenas 1 reveal that house-
holds on average had to spend more than their total
monthly expenditure for one admission to a hospital
in 1995. Most people had to rely on an extended fam-
ily system of risk sharing in cases of health treatment.
Nevertheless, the chances that the poorest 10% of the
population would be hospitalised was only one-tenth
of the probability for the richest 10% [5].
During the economic crisis, incomes fell while
unemployment rose, resulting in a striking increase in
the rate of poverty. At the same time, the economic
collapse caused a dramatic decline in the government
expenditure on health. Simms and Rowson [3] found
that government spending on primary health care was
reduced by 25% per capita between 1996/1997 and
1999/2000. In 1998, according to Susenas data, house-
holds’ spending on health was approximately twice that
of the government’s [6]. Thabrany [5] found that before
the decentralisation reform, means from central gov-
ernment covered one quarter of the total of US$ 18
spent on health per capita in 2000.
1 Susenas, National Social Economic Survey, is a huge household
survey, which is annually conducted by the Central Bureau of Statis-
tics, BPS, in all provinces of Indonesia.
249
The central government budget allocation to health
was further reduced to 1.9% of the state budget in 2005,
which is equivalent to US$ 3.5 per capita (exchange
rate 9500 rupiah per US$) (Jakarta Post, 16.8.2004).
Our survey reveals that household spending on health
is less than US$ 10 per capita per year after decen-
tralisation. For comparison with expenditure in 2000,
an average annual inflation rate of 10% in the years
2000–2004 should be taken into account. District gov-
ernments’ budget allocation for health services after
decentralisation is typically around US$ 3.0 per capita
per year (Kompas, 17.3.2004). However, as we shall
see, there may be major discrepancies between dis-
trict budgets and real accounts. Means earmarked for
the health sector in the new district budgets are eas-
ily tapped for other purposes without transparency or
public debate.
The economic crisis and the reduced central gov-
ernment funding had a detrimental impact on health,
especially on children and those of lower economic
status [3]. Lanjouw et al. [6] reported that the utili-
sation of modern medical facilities, especially public
services, dropped significantly during the crisis. This
was particularly the case with poor households, less
frequently reporting ill. The government together with
the World Bank and the Asian Development Bank
(ADB) implemented temporary measures to curb the
worst social impacts of the crisis. Among these was the
social safety net for the health sector (JPS-BK, Jaring
Pengaman Sosial Bidang Kesehatan), aiming to pro-
tect poor citizens’ access to health care. According to
the World Bank [7], ‘catastrophic results were averted’
by these measures. However, Simms and Rowson [3]
found that the lenders’ assessments of health during
the crisis were inaccurate and misleading. In the case
of the JPS-BK, ‘the donor process was neither trans-
parent nor consultative’ ([3], p. 1385). There seems to
be general agreement that the JPS-BK health card sys-
tem (kartu sehat) did not work well: this was partly due
to ignorance among patients and partly due to irregu-
lar practices and corruption among service providers
[8]. Unclean administrative practices have tended to
escalate people’s dissatisfaction with government insti-
tutions and thus paved the way for privatisation.
Deregulation and privatisation of the health sec-
tor in Indonesia today is mainly driven by a triple
set of forces. Firstly, the international organisations
and globalisation interests, such as the WTO’s General
250 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
Agreement on Trade and Services (GATS), the IMF,
and the ASEAN free trade agreement ([5], Kompas,
27.3.2002). Secondly, the Indonesian government, who
wants to save in their budgets by reducing expenditures
on non-vocal groups instead of cutting subsidies on oil
or increasing tax incomes. Thirdly, the Indonesian and
multinational insurance business interests, who want
to see the economic risks of becoming sick increasing
and thereby a rise in people’s willingness to pay for
insurance services.
Private health insurance schemes represent a
favourite measure in the new health policy. Still, only
around 15% of the population are covered by health
insurance. The distribution is related to position and
income. Consequently, health services are less acces-
sible in poor areas of the country and among deprived
segments of society. Indonesia today seems to be grow-
ing towards a US style ‘entrepreneurial health care
system’ ([5], p. 3), where the responsibility of the
government is being reduced and increasing market
shares opened for the private sector. There are increas-
ing numbers of private hospitals and clinics across
the country, especially in the larger cities [4]. Talking
about the vision of a ‘Healthy Indonesia’ (Indonesia
Sehat) in 2010, the Ministry of Health sees a reduced
role for the puskesmas and an enhanced function
for the private ‘family doctors’ and private insurance
schemes. In many districts, puskesmas and public hos-
pital services are already abolished due to the lack
of funding. In wealthy areas, their functions are sub-
sequently taken over by private interests (Kompas,
4.11.2003).
The overall reduced real-terms per capita spending
on health care in Indonesia over the last few years indi-
cate that a reduction in central government spending
due to decentralisation and privatisation is not com-
pensated by people’s increased ability or willingness to
pay for services, as observed in some other countries
[9]. The Indonesian Doctors’ Association is critical
of the commercialisation of the health sector. They
complain that health centres and public hospitals are
turned into sources of revenue for district governments
and that private insurance systems just provide bene-
fits to the insurance companies (Kompas, 19.12.2003).
Meanwhile, Smeru [10] found that doctors now tend to
utilise positions in puskesmas and other public institu-
tions to attract patients to their own private and more
expensive services.
3. Decentralisation and privatisation
Corruption was known to be extensive under the
Suharto regime. The general lack of transparency in
state affairs and the limited accountability of influ-
ent institutions facilitated rent-seeking and shady eco-
nomic affairs. The economy was totally dominated by
large-scale business conglomerates with ethnic Chi-
nese and the Suharto family and their associates in
crucial positions. The state government was authoritar-
ian and highly centralised. The regional hierarchy was
strictly ordered, with the heads of provinces and district
administrations selected by the president. The central
elite with its regional operational network for collect-
ing and redistributing money accumulated wealth in
Jakarta but also managed to spread enough economic
incentives to curtail opposition in the country, so long
as the economy was growing steadily.
The deep economic crisis in Indonesia since 1997,
illustrated by a contraction of the GDP by 14% in
1998, turned the fundaments of political power in the
society. While central governments in poor countries
are typically resisting the decentralising of authority
to local levels [11], the authoritarian and centralised
Suharto regime lost its bargaining power against out-
spoken students and resilient local elites. The students
fought for democracy and regional leaders struggled for
autonomy. Both prevailed, substantially supported by
international organisations, who wanted to see ‘good
governance’ in politics and state affairs as well as in
private business. In line with the key policy prescrip-
tions of the Washington Consensus, the IMF offered a
rescue package, which was conditional on the imple-
mentation of deregulation and privatisation, which
included the supply of public services. The World
Bank strongly advocated democracy, decentralisation
and privatisation, as it was expected to contribute to
creating ‘good governance’ and reduce government
expenditure. Democratic elections were introduced in
1999 and decentralisation followed in 2001.
In Indonesia as elsewhere, the policy of decentrali-
sation was accepted as a reaction to inefficient and cor-
rupt central bureaucrats and was regarded an integral
part of the democratisation process. Many politicians
remain convinced that the decentralisation process is
needed to save money and ensure a better delivery of
public services than was the case under the previous
centralised government system. Also, arguments are
 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
put forward that the reform is necessary to curb tenden-
cies to national disintegration after decades of author-
itarian centralisation of powers [12]. Others regard the
autonomy policy as a threat to national integration and
a move away from good governance and justice among
social classes and geographical areas [13].
Governance, in its broadest definition, refers to ‘the
sum of the many ways individuals and institutions, pub-
lic and private, manage their common affairs’ ([14],
p. 796), and it includes administrative, political, and
economic dimensions of power relations and authority
structures [15]. ‘Good governance’, according to the
dominating international institutions, should be facil-
itated through the establishment of its ‘four pillars’:
accountability, transparency, predictability, and public
participation. The four pillars should be constructed
by decentralising political decisions and administrative
responsibilities and by making public services, such as
health care, subject to market exposure. According to
the World Bank, decentralisation can reduce admin-
istrative bottlenecks in decision making and increase
the efficiency of government and its responsiveness
to local needs. It can also enhance the accountabil-
ity of public institutions, improve service delivery, and
allow greater political representation and participation
of diverse groups in decision making [16].
The decentralisation policy induced by foreign insti-
tutions gains some support from social sciences. From
a political science perspective, decentralisation is com-
monly regarded as fundamental to the development
of democracy. It normally functions as a means for
increased interest in political matters and may result
in enhanced participation by ordinary citizens. From
an administrative point of view, bringing bureaucrats
closer to the people whom they serve should ideally
increase their efficiency and the chances of popular
monitoring and control [17]. Theories and empirical
findings on associations between decentralisation and
governance qualities are highly ambiguous, however
[18], and policies need to be sector and context spe-
cific. In Indonesia, socio-economic conditions have
definitely been overlooked in the eagerness to create
devolution and deregulation reforms in health care.
If main political concerns are personal rather than
community interests and aspirations, and if extensive
information asymmetry exists as a moral hazard in soci-
ety [19], then risks are running high that decentralising
political power and administrative responsibility could
251
increase corruption and reduce the quality of public ser-
vices, like health care. As stated by one of the original
architects behind the decentralisation reform in Indone-
sia, ‘local parliaments are places where “black” money
is circulating without any legal instrument available
to stop it’, and public trust in regional governments
is accordingly on a downturn ([20], p. 66). Today, the
central state does not have a mandate to audit local
governments, and district authorities are not obliged to
report accounts to central government. ‘Decentralisa-
tion has minimised the vertical accountability mecha-
nisms’ ([21], p. 294). Vertical reporting is substituted
by the new principles of ‘horizontal accountability’, but
‘disclosure of the local budget is rather limited’ and the
role of the legislative seems to be weak in relation to
the executive bodies at the local level ([21], p. 295).
The new decentralisation policy was put into prac-
tice from January 2001. One main provision of Law
22/1999 on regional government is the abolition of
the former clear-cut hierarchical relationship between
central government, provinces and districts. Another is
that regional heads at both provincial and district levels
(guberneur and bupati) are elected by regional legisla-
tive bodies and held accountable to these, rather than
to higher levels of government. The districts (kabu-
paten/kota), which represent the third level in the
previous five-tier administrative system, now became
responsible for the implementation and daily opera-
tions of activities in such sectors as education, health,
culture, public works, and the environment. The main
provision of Law 25/1999 is to delegate also the finan-
cial responsibility of the mentioned sectors to the dis-
trict level. The allocation of funds from central gov-
ernment sources decreased, while increasingly district
government expenses are now based on tax revenues
from their own natural resources and business activi-
ties. Income per capita is more than 50 times higher
in the richest districts compared to the poorest, mainly
because of earnings from oil and gas resources. In prin-
ciple, after the decentralisation reform there are six
sources of funding of public health care at the district
level:
(1) Natural resource and tax revenue sharing from
the central government. Between 15 and 80%
of natural resource revenues are now distributed
to district governments. They have the authority
to decide its allocation without reporting to the
252 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
central government. A few districts rich in oil and
gas have especially gained from this reform, whilst
the remaining are losers.
(2) The Central Government General Allocation Fund
(Dana Alokasi Umum, DAU), which is designed
to partially equalise the fiscal capacity among dis-
tricts. Local government decide the distribution of
this fund, without reporting to central government.
25% of net central government revenue should,
according to the law, be allocated to the DAU, of
which 90% goes to the district governments. The
DAU is distributed among the regions based on the
size of their population and area, and on their levels
of income and natural resource endowment.
(3) The Central Government Special Allocation Fund
(Dana Alokasi Khusus, DAK), which is earmarked
for specific purposes. The DAK represents a minor
share of local government’s income and a tiny
source of health funding (US$ 0.23 per capita in
2004). Spending from the special allocation fund
is the only item of expenditure that districts are
supposed to report to central government.
(4) Local government incomes from own sources, for
instance local taxes and profits from properties,
like health institutions.
(5) Contributions by companies and communities.
(6) Individual households.
Many countries undergoing decentralisation and
deregulation have experienced a decline in real-terms
government funding for the health sector [22]. There is
also considerable evidence that unofficial payments are
deeply embedded in the markets for health care in poor
countries in transition [23,24]. According to Homedes
and Ugalde [25], neo-liberal reforms do not improve
the quality, equity, or efficiency of health care systems
in Chile and Colombia. The dominant results of pri-
vatisation and deregulation of health services in Latin
America, as documented in numerous reports, are ram-
pant, unethical behaviour of health insurance firms and
multiple neglect and exclusion of poor people, espe-
cially in remote areas [25].
Price elasticity of demand for health care tends to
vary among geographical areas and social groups. Ris-
ing prices of health care typically leads to a decline
in health service demand especially among the poor.
Deregulated and privatised health systems therefore
run the risk of no longer reaching the whole popu-
lation and leading to greater inequality in access to
health services [6]. Previous evidence from Indonesia
also recounts that increasing prices for health services
lead to deterioration of the health status of the poor
[26]. According to a recent anthropological study from
Lombok [27], there is now a common reluctance among
the poor to go to the local clinics due to the fear of high
costs. Examples are presented of people dying from
easily treatable sicknesses due to their concerns about
expenditures. Many reports also reveal that people are
exploited by hospitals or are refused access to basic
health care if they lack the ability to pay in advance
(Jakarta Post, 18.10.2003). In spite of this, deregula-
tion, privatisation, and cuts in government funding of
health care continue in Indonesia.
4. Methodology and study areas
The main objective of our empirical research is
to uncover the impacts of the 2001 decentralisation
reforms on access to and quality of health care in
Indonesia. Four districts are selected for study: Bantul,
Mataram, Kutai Kartanegara, and Ngda. They repre-
sent a wide variety of income per capita and level of
urbanisation and centrality within the national context.
In three of the four districts (Bantul, Mataram, and
Kutai Kartanegara) we conducted focus group discus-
sions that consulted representatives from the legislative
and executive bodies of the local governments. Health
centre and hospital employees, members of NGOs,
and ordinary users of health care systems were also
included. In these districts we also made in-depth inter-
views with puskesmas physicians, representatives from
the district parliament, and bureaucrats in the district
health administration. In all four districts, we con-
ducted household surveys, comprising a minimum of
120 households in each district. The interviews with
family heads were made in a number of villages, which
were selected on the criterion of typicality and various
distances from centres of public service supply within
the four districts. Households to be included in the
survey were drawn based on an area-wide sampling
within randomly selected sub-villages, for instance
every tenth household in a systematic order to cover
the whole geographical area of the selected sites. The
total number of household respondents is 538. Data
collection was made in the period between July 2003
 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
and March 2004. In the following, we briefly present
the four study areas:
Kabupaten Bantul is located in the province of
Yogyakarta, centrally located in Java. It is a middle-
income district and partly urbanised, close to the city of
Yogyakarta with its 100 institutions of higher learning.
The population of Bantul is 765,000, with a popula-
tion density of 1530 km−2 . Incomes are mainly from
agriculture but increasing numbers commute to the
neighbouring city on a daily basis for trading or gaining
employment in the service sector there. Within Bantul,
the survey was made in the villages of Karang Talun,
Girirejo, and Selopamioro, all within the sub-district of
Imogiri.
Kota Mataram is the capital city in the province
of Nusa Tenggara Barat (NTB). It is a middle-
income district, located on the island of Lombok,
on the border between Indonesia’s ‘inner’ (Java and
Bali) and ‘outer’ islands. The population is 315,000
(5163 km−2 ). The economy is dominated by the ser-
vice sector, governance, trade, transport and tourism.
The survey was made in the neighbourhoods (kelura-
han) of Cakrabarat, Bertais, and Sayang Sayang, all in
the sub-district of Cakranegara.
Kabupaten Kutai Kartanegara is located in the
province of Kalimantan Timur, peripherally located
within the national context. It is among the wealthi-
est districts in Indonesia as a result of income from
oil and gas extraction, as well as timber. The district
has 460,000 inhabitants and is predominantly rural
with a population density of 17 km−2 . Migrants from
Java and Bali represent a large share of the population.
The district has a high number of private and govern-
ment companies operating in the oil industry, mining,
and logging. The sparsely populated inner areas of
the district have limited accessibility mostly using the
Mahakam River, and we selected a relatively centrally
located and more densely populated sub-district, Teng-
garong Seberang, for the survey. Interviews were made
in the villages of Manunggal Jaya, Kertabuana, and
Suka Maju.
Kabupaten Ngada is located on the island of Flo-
res in the province of Nusa Tenggara Timur (NTT),
which is known to be among the poorest provinces
in Indonesia. The district is predominantly rural
and remote from major centres of higher educa-
tion and information. The total district population
is 235,000, with a population density of 77 km−2 .
253
The survey was conducted in the villages of Latung,
Lengkosambi, Rawangkalo, Denatana, Nginamanu,
Waepana, Mengeruda, Kaligejo, Werupele, and Inerie.
In addition to the qualitative data from focus group
discussions and in-depth interviews and the quanti-
tative data from questionnaires, the paper also draws
on secondary data, mainly statistics from Badan Pusat
Statistik (BPS, Central Bureau of Statistics), obtained
from national, provincial and district levels. Avail-
ability and reliability of secondary data are limited,
however, and we have intentionally avoided the depen-
dency on monopolised data from BPS (Susenas data
for instance) in a politically sensitive study like this.
Our own data also have limited reliability in some
aspects. Respondents may not have been willing to tell
the whole truth in focus group discussions or in-depth
interviews, and users of health care systems have prob-
ably assessed the value of revealing information to the
enumerators, though guaranteed full anonymity. Peo-
ple in Indonesia are careful to criticise the government
and its policies in a formal interview setting. It should
also be taken into consideration that the decentralisa-
tion reforms in the post-authoritarian regime were still
at an initial stage at the time of the survey. Also, relia-
bility of survey data on quality of health services among
poor and uneducated people is generally weak.
Health care quality is an illusive concept and assess-
ments typically vary among health care professionals
and between professionals and patients [28]. According
to O’Connor and Shewchuk ([29], p. 23), ‘patient satis-
faction is not a well-understood phenomenon’. Partic-
ularly in the Indonesian context, we can expect to find
two different problems with user assessments in sur-
veys: one is related to the lack of information on health
and health care alternatives among patients; the other is
respondents’ reluctance to openly criticize the authori-
ties. People’s opinions on quality of services may also
have been influenced by government pro-reform policy
statements and propaganda. Respondents’ judgments
of health care quality will therefore be considered care-
fully in the following analyses.
All household interviews were conducted in the
houses of the respondents. Also questions related to
education and security services were included in the
questionnaire. Very few refused to be questioned. The
interviews took about 30 min to complete. Each inter-
view was initiated in the same manner, introducing the
researchers and their institutions and the purpose of the
254 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
study. Representatives from the government were not
present in any situations during the data collection.
5. Findings and discussion
5.1. Administrative impacts of decentralisation
In the four studied districts, the health budgets repre-
sent an average of US$ 5.3 per capita in 2003 (exchange
rate 9000 rupiah per US$), or 7.2% of their total bud-
gets (APBD). Budget figures are depicted in Table 1.
Remarkably, no figures are available for the real dis-
trict government expenditures on the health sector. This
means that there is a total lack of financial transparency
and accountability in the public health sector in all dis-
tricts. In Kutai Kartanegara, for instance, the budget
figures are highly fictive and no funds at all seem to
be released from the bureaucracy to the institutions of
health care in 2003.
The fact that no real district health expenditure
figures are available, neither to the public, the dis-
trict parliament, nor to researchers from the country’s
leading university, itself indicates a severe weakness
of the reformed administrative system. The lack of
accountability and transparency continues to under-
mine expected positive results of decentralisation and
also reduces the value of presenting the budget figures
in Table 1.
In Bantul, the health sector is politically second in
priority, only after education. As expressed in a focus
group discussion by a medical doctor who is employed
in a sub-district health centre: ‘According to the bud-
get, funding has increased’. However, the only way he
sees for the puskesmas to survive is by income gen-
eration, ‘by self-management and self-funding’. After
the regional autonomy, ‘the problem for puskesmas is
[government] funding, which is very scarce. That is
where the problem exists’. Likewise in Kutai Kartane-
Table 1
Local government budgets, 2003 (US$ 1 = 9000 rupiah)
District Total budget (APBD)
(million US$)
Bantul 48.4
Mataram 21.8
Kutai Kartanegara 273.0
Ngada 25.3
gara, a local government officer said in an interview:
‘Now, the doctors must be businessmen’. The medical
doctor in charge of the Health Forum in Kutai Kartane-
gara (an informal district consultative group of health
workers) made the following statement in a focus group
discussion: ‘I don’t see any advantage of the regional
autonomy for the health care in this district. Until now
(March 2004) we have not received any operational
fund for the whole of 2003’. A representative from the
district health department in the same discussion con-
firmed the fact: ‘The donation of 2003 is not yet poured.
I think that is our classic problem. We don’t even know
the budget allocation for the health sector’.
Reduced government funding of public health facil-
ities results in fewer medical doctors working in pub-
lic institutions. In Bantul, for instance, the number of
physicians is halved to the current 26, included trainees.
Doctors are pulled into the private sector by profit
motives and higher income opportunities. One medical
doctor in Bantul expresses it like this, ‘lots of private
clinics have emerged recently’.
Consultation fees in public health centres vary
among the districts and are determined by the district
parliaments. In Bantul, the consultation fee rose five-
fold to US$ 0.33 after the decentralisation reform. In
Kutai Kartanegara the rate doubled to US$ 0.17 and
in Mataram it formally remains the same, US$ 0.17.
These fees include only the first consultation, which is
normally a brief meeting with a nurse. ‘But for special-
ist consultation, they should pay more’, says a medical
doctor in Kutai Kartanegara. There are no fixed costs
for physicists’ consultation or treatment. According to
a puskesmas doctor in Bantul, price rises direct the mid-
dle class to the private sector, which is only slightly
more expensive, normally US$ 1.1–1.7 for the first
consultation—‘so now I opened my private clinic here’.
Access to services and medicine are other reasons
why the wealthier members of the population tend
to move to the private sector. According to a public
Health budget Share of total Health budget
(million US$) budget (%) per capita (US$)
2.7 5.6 3.6
0.8 3.7 2.5
3.3 11.9 7.1
1.9 7.4 7.9
 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
health care user in Kutai Kartanegara, ‘kartu sehat [free
health card, which can only be used in public institu-
tions] means one medicine for any illness’. Similarly
in Mataram, a user of puskesmas expressed in a focus
group discussion: ‘Every time we go to puskesmas, we
are given the same medicine, whereas our disease is
different. They give paracetamol and CTM [antihis-
tamin]’. The statement was supported by a doctor, who
replied: ‘Yes, it is because we only have stock of certain
medicine’. Many health workers are willing to admit
that incentives for giving good service in public facil-
ities are weak and that physicians push patients into
their private practices by offering slow procedures and
limited treatment and drugs in puskesmas and govern-
ment hospitals.
Many stories are told about problems with the social
safety net and free health cards. A doctor in a focus
group discussion in Mataram said that ‘since 2001
we faced more problems, like with the JPS-BK pro-
gramme. We have to admit, . . . it is hard to overcome
the corruption’. At the same time, a former patient told
us about her experience. Following the normal proce-
dures of consultation in a puskesmas for a reference
and then coming to the public hospital for admittance,
‘they told they cannot do if we used the kartu sehat
[JPS card], so we had to pay around 1 million rupiah’
[US$ 111]. A medical doctor replied that things in
fact had changed dramatically after the regional auton-
omy, and he raised the issue of pressures being put
on public hospitals to contribute financially to the dis-
trict government budget, simply as a source of gov-
ernment income. Normally 75% of revenues created
in puskesmas and public hospitals now go to the local
governments.
Treatment and curative health care generates more
revenues than preventive health care and environmental
improvements. Some medical doctors expressed a deep
concern about these facts in our in-depth interviews.
Turning puskesmas from focusing on a preventive to a
curative function will imply that the ‘social health ser-
vice will decrease’, according to a doctor interviewed in
Bantul. Environmental health awareness, for instance
toilet and drinking water facilities, will no longer be a
duty of public health institutions and definitely not of
any private business. As conveyed by another medical
doctor in Bantul, ‘the legislative does not have enough
knowledge about these problems’. The last remark was
clearly indicating that local government institutions are
255
more concerned about income generation than public
health.
In conclusion, our findings clearly point towards
negative administrative impacts of the decentralisa-
tion reform. Firstly, the total lack of transparency gives
the executive branch of district administrations a high
level discretion and low level of accountability, which
is often misused to the disadvantage of health. Sec-
ondly, too much responsibility has suddenly been left
with local institutions without education or training,
and they are therefore poorly prepared for planning and
implementation of new policies. Thirdly, the executive
and legislative branches of district administrations, as
well as the medical doctors and personnel, are too con-
cerned about income generation. Their main concerns
are often in contrast with matters of environmental and
preventive health.
5.2. User satisfaction
As discussed in Section 4, the reliability of survey
data on health quality perception among poor and uned-
ucated people is weak. It is still remarkable to observe
that most respondents (75%) find that the quality of
available health services has improved over the last 5
years. Also surprisingly, there are no significant differ-
ences among the districts in this regard. This finding
underscores the limited reliability of the survey data on
this point, given the huge differences among the four
districts as regards distributed funds and the progress
of the reform process. As regards administration of
services, 93% of respondents find that administrative
procedures at their nearest puskesmas are fast and clear,
while only 7% report that they are slow and compli-
cated. These findings should also be interpreted care-
fully.
Transcripts from our focus group discussions and
in-depth interviews clearly reveal a general and under-
lying optimism among politicians and bureaucrats
regarding the emerging health service reforms. Local
governments put health among the top political priori-
ties, and leading district politicians and bureaucrats join
vocal forces in advocating the ongoing reorganisation.
The well-known ‘babonisasi’ programme in Bantul is
only one example of populist policies to convince and
gain support from the people. In this district, children
in most families were given a hen (babon) for free to
take care of. The policy instrument should improve
256 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
people’s nutrition by eating eggs, and thereby enhance
their physical health and mental capability. When talk-
ing about decentralisation reforms in this district, this
programme is regularly referred to as an example of
success, among district politicians and administrators
as well as ordinary citizens.
5.3. Access to and costs of health care
In our survey, public facilities were used three times
more often than private services. The reasons relate to
price differences and geographical access to elemen-
tary services. The most frequent reason for treatment
was children’s illness. Second was treatment of adult’s
sickness, followed by immunisation, dental treatment,
and pregnancy. As much as 57% of respondents made
use of private services in addition to the public facil-
ities. The reasons given for choosing private instead
of public institutions are access to medical doctors,
availability of medicines, and the perception of overall
service quality.
As much as 95% of the 538 survey respondents
reported that they have needed some kind of health
services for themselves or members of their families
over the last year. 90% reported that they could reach
the nearest puskesmas within 10 km. Even in the rural
and poor Ngada district, 57% could find the nearest
health centre within a distance of 5 km.
Households in our survey spent a maximum of US$
2200 on health services over the last year. The aver-
age cost is US$ 50 per household. On average, there
are 5.09 members in one household, which makes per
capita household spending on health equivalent to US$
9.8. Compared to US$ 18 spent in total per capita in
year 2000 [5], and taking into account an approximate
average of US$ 6.5 spent per capita per year by the
central and local governments today, the figures clearly
point in the direction of a reduced total real per capita
spending on health over recent years. Based on our lim-
ited survey data, uncertain local government accounts,
and an average annual inflation rate of 10% during the
years 2000–2004, we can roughly stipulate that real per
capita spending on health had been reduced by 38%
during these 4 years.
Two of three respondents (67%) found that costs of
specific health services today are higher or much higher
compared to 3 years ago. Those who found costs to be
the same or lower are mostly families in Kutai Kar-
tanegara with health insurance (Askes and Jamsostek),
while average costs are also significantly higher in this
district. Half (50%) of all respondents had some kind
of health card, mostly kartu sehat and 80% of those
with a health card made use of it. Nine percent of our
respondents reported that they had to pay ‘irregular
fees’ (higher than published fees) to obtain health ser-
vices. In our studied areas, this problem is mainly found
in Bantul, where 22% had experienced problems of this
kind.
Much emphasis in our interviews and discussions
was put on the price of a puskesmas consultation. These
costs do not matter much, however, whether they are
equivalent to a bottle of soft drink (US$ 0.17) or a pack-
age of cigarettes (US$ 0.78). What counts is the cost
of being treated. Giving birth in a public hospital, for
instance, even with a health card, costs at least US$ 55
in our study areas, under the most basic conditions and
for an uncomplicated delivery. The cost of a compli-
cated delivery or one under better physical and medical
conditions would be much higher.
6. Conclusion and policy recommendations
The central government in Indonesia has initiated
a dramatic decentralisation and privatisation reform,
which reduces its own powers and surrenders author-
ity to district authorities and private actors. The main
objectives are to decrease central government spending
on public service delivery and to increase responsibil-
ities and duties at lower levels of government and with
households. Principles of universal access and solidar-
ity in health services have yielded to a market-based
ideology and an increasing role of private insurance
companies. The reforms were implemented without
ensuring that the decentralised entities had the capac-
ity to manage the system. Decentralisation on this scale
implies an ‘unavoidable learning process’ and ‘at least
a decade-long transitional process’, according to one of
the reform architects ([20], p. 71). Our research, which
is based on both quantitative and qualitative methodol-
ogy, has revealed a number of negative consequences
of the decentralisation and deregulation policies on the
health sector and points to paths of progress in the fur-
ther transition process.
A main finding in our research is the total lack of
transparency and accountability in local governments’
 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
financial handling of the health sector. Also as an
administrative impact of the decentralisation policy,
public health institutions like puskesmas and district
hospitals are turned into profit centres. Instead of focus-
ing on preventive health and environmental improve-
ments, puskesmas now need to earn money to cover
their operational costs and generate an income for the
local governments. Public hospitals often refuse to
offer treatment to poor people without the ability or
willingness to pay.
Total spending on health per capita in Indonesia is on
a downturn. Central government budgets are reduced,
while local government health service accounts are
unforeseeable and non-transparent. Household expen-
ditures on health are also generally low, for instance
in comparison with costs of children’s education [30].
Published fees for consultations in public health cen-
tres are mostly raised over the last 3 years, but are
still reasonable. Those costs are of limited relevance,
however. What matters, are the real costs of medi-
cal treatments. All indicators in our study point in
the direction of substantially increasing real costs of
good-quality medicines and professional therapy. Poor
people respond by pulling out of the formal and modern
health service markets.
Recent reforms, at an initial stage, seem to be well
received by ordinary citizens, based on their reported
perception of administrative procedures and health
service quality. There is a remarkable discrepancy,
however, in the perception of health service quality
between resource persons and ordinary citizens in our
study. Even though physicians admit withdrawing from
public services to run their private businesses, and
in spite of the fact that only one or two medicines
are available in puskesmas, our survey respondents
generally have little to complain. This underlines the
ignorance and information asymmetry problem pre-
vailing in health service markets in a relatively poor
context like Indonesia, where ordinary people have lim-
ited education and access to information. Supported
by a number of other studies, we conclude that poor
and uneducated people can hardly assess the qual-
ity of health services. With the dominant informa-
tion asymmetry in society, there is an urgent need for
policies of ethics and regulation to protect people in
need of health services and to help them making deci-
sions on treatment options, like in other poor countries
[25].
257
A large part of the Indonesian population ‘is unused
to insist on service quality’ in health issues ([2], p. 19).
This is particularly the case for rural and uneducated
people, who still have a strong respect for the author-
ities and people of higher social status. The potential
strength of a majority of rural and poor Indonesians
can therefore not yet be utilised in a demand driven
process of quality improvements and mortality reduc-
tion. Responsible politicians at central and local lev-
els should provide the competence and resources to
drive a reform process forward, which develops human
resources and quality of life, and which puts ethics and
equity into focus.
Compared to the majority of rural poor, who are
ignorant on health issues and non-vocal in politics, the
increasingly wealthy middle class now has a strong
say in politics. Higher taxes and public spending may
not serve their personal interests and they may be
more interested in paying private health insurances for
themselves. After decades of authoritarian governance,
well-educated and urban Indonesians are well aware of
some negative impacts of monopolists in public service
provision, included health care. They therefore tend to
be open to deregulation and privatisation.
In post-authoritarian reforms, problems that caused
pre-reform failures have often been neglected. These
include people’s ignorance and the lack of demand
driven improvements. Also, monopoly suppliers of
health services tended to be arrogant against customers
and not exposed to any substantial feedback on qual-
ity from the local societies that they served. However,
gains from pre-reform successes should not be for-
gotten, policies of equity and ethics should be recon-
sidered, and specific contextual conditions should be
taken into account, before health strategies are fur-
ther developed. The ‘good governance’ concept, as
used by leading international organisations all over the
poor world, has implied a ‘de-politicization of politi-
cal processes’ ([31], p. 97) and has taken little notice
of contextual variances among countries and regions.
Our policy advice for the further ‘transitional process’
in Indonesian health policies includes six points:
(1) Reformers should not take it for granted that
local governments have sufficient competence and
capacity to take on the full responsibility for public
health services. Also, the history of authoritarian
bureaucrats, corruption, and very weak legislative
258 S. Kristiansen, P. Santoso / Health Policy 77 (2006) 247–259
and judicial systems should create more awareness
in the process of implementing devolution reforms.
(2) Certain kinds of treatments should be free for all in
public clinics and hospitals. Examples are medica-
tion and care to reduce maternal and infant mortal-
ity. All women should have free access to deliveries
with professional birth attendants, for instance.
(3) The well-established system of public health cen-
tres at sub-district and village levels should be
maintained, including the mandatory service for
newly graduated physicians.
(4) The role of puskesmas in environmental and pre-
ventive health care should be maintained and oper-
ational costs of such services should be covered by
central government funding.
(5) Public health cards are difficult to administer,
and gatekeepers to medical treatment should be
avoided.
(6) Local governments should be required to report
on all health expenditures to the central Min-
istry of Health. This would be a requirement to
meet demands for transparency and accountabil-
ity and to fulfil certain minimum standards of
public service delivery. Local access to informa-
tion should also be improved. This is necessary
to develop ‘horizontal accountability’ and demand
driven public service improvements. Rights aware-
ness needs to be enhanced, for instance through
public information centres or ombudsmen at the
district level.
Rather than reducing public involvement and costs
and considering health expenditures as devastating sub-
sidies, increasing government spending on health care
should be seen as an investment in human resource
development and social stability. Ethical concerns
about equity and poor people’s welfare should be given
priority before business interests. Entry barriers in med-
ical service and businesses are far too high to create
a sound competition among suppliers in the Indone-
sian context. Patients are therefore vulnerable to unfair
treatment in a deregulated market.
Acknowledgements
The paper is based on research under the institu-
tional collaboration between Agder University Col-
lege, Norway, and Gadjah Mada University, Indone-
sia, funded by the Norwegian Ministry of Foreign
Affairs and NORAD. Recently, this collaboration has
set a focus on good governance and human rights. In
addition to the authors, the following persons have
contributed in data collection and methodology dis-
cussions: Pratikno, Cornelis Lay, Lambang Trijono,
Abdul Gaffar Karim, Derajad Widhyarto, Nur Azizah,
Desi Rahmawati, Nurul Aini, Vita Dian Putri, Pras-
towo, Hery Setyo Nugroho, Dag Ingvar Jacobsen, Arne
Olav Øyhus.
The authors are indebted to two anonymous referees
for their important comments to an earlier draft.
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Stein Kristiansen is professor of development studies at Agder Uni-
versity College, Norway. He has been in charge of the institutional
collaboration with Gadjah Mada University since 1997 and has con-
ducted research in Indonesia on issues like entrepreneurship and
small-scale business, youth violence, information asymmetry, and
good governance. He has published several articles on these issues
in international journals.
Purwo Santoso is a senior lecturer and currently the vice dean for
academic affairs at the Faculty of Social and Political Studies at
Gadjah Mada University, Yogyakarta.