Health spending, utilization and governance in decentralized Indonesia Robert Sparrow and Menno Pradhan

Decentralization in Indonesia Big Bang in Big Bang in Transfer of functions to over 300 districts, including health. Transfer of functions to over 300 districts, including health. High variations in General Block Grants allocated to districts. High variations in General Block Grants 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 lowest per capita transfersHighest per capita transfers 50 times that of lowest per capita transfers

Decentralization in Health Sector Central/Local public health expenditures=0.72 Central/Local public health expenditures=0.72 Freedom in prices, contracts and choice of public services. Freedom in prices, contracts and choice of public services. Restricted in civil service contracts, civil service health insurance Restricted in civil service contracts, civil service health insurance Weak coordination between central and local public expenditures – no clarity of functions, overlap in many instances Weak coordination between central and local public expenditures – no clarity of functions, overlap in many instances Planned ‘minimum service standards’ Planned ‘minimum service standards’

Objectives of this study Describe patterns of Governance and public spending in health sector since decentralization Describe patterns of Governance and public spending in health sector since decentralization Data sources Data sources Governance and Decentralization Survey 2002Governance and Decentralization Survey 2002 Susenas surveysSusenas surveys Fiscal dataFiscal data Health clinics survey from 1999Health clinics survey from 1999

Participation of PUSKESMAS Low correlation between district and Puskesmas answer

Participation of Community correlation between district and Puskesmas answer (except budget)

Participation of Community

Transparency in health sector Low correlation between district and Puskesmas answer

Rule of law in health sector Low correlation between district and Puskesmas answer (except medicine theft)

Governance indicators Factor analysis used to reduce to single variable for Factor analysis used to reduce to single variable for PuskesmasPuskesmas Dinas officialsDinas officials HouseholdsHouseholds

Regional variation in public and private health expenditures

Private / Public health spending One percent increase in public health expenditure leads to a One percent increase in public health expenditure leads to a -0.11% percent decrease in private health expenditure-0.11% percent decrease in private health expenditure Gini coefficient of Gini coefficient of District public health spending 0.36District public health spending 0.36 Private health care spending0.30Private health care spending0.30 Total health care spending0.25Total health care spending0.25

Determinants of public health spending One percent increase in local government revenue leads to a One percent increase in local 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 spending.. Cont. Source of government revenue matters for spending allocations. Source of government revenue matters for spending allocations. Regional tax and tax sharing increase development expendituresRegional tax and tax sharing increase development expenditures Retribution (user fees) increases routine expendituresRetribution (user fees) increases routine expenditures In 2001, lack of equipment in Puskesmas led to higher than expected public health care expendituresIn 2001, lack of equipment in Puskesmas led to higher than expected public health care expenditures

Prices at health providers One percent increase in health expenditures leads to One percent increase in health expenditures leads to 0.25% decrease in prices charged at PUSKESMAS in % decrease in prices charged at PUSKESMAS in 2001 Better governance according to DINAS strengthens thisBetter governance according to DINAS strengthens this Better governance according to households weakens this relationshipBetter governance according to households weakens this relationship Little impact of local government policies on private prices – only increased routine expenditures leads to lower private prices. Little impact of local government policies on private prices – only increased routine expenditures leads to lower private prices.

Utilization of health providers One percent increase in public health spending leads to One percent increase in public health spending leads to increase in public visits (pp per month)0.025 increase in public visits (pp per month) decrease in private visits decrease in private visits Development expenditures are more important in decreasing private visits while routine expenditures have greater effect in increasing public visits Development expenditures are more important in decreasing private visits while routine expenditures have greater effect in increasing public visits More spending on travel leads to higher share of public visits. More spending on travel leads to higher share of public visits.

Satisfaction of households High satisfaction 40% ok, 43 % good High satisfaction 40% ok, 43 % good 40% reports services improved at puskesmas since decentralization 40% reports services improved at puskesmas since decentralization More public expenditure is associated with higher levels of satisfaction More public expenditure is associated with higher levels of satisfaction

Conclusion Perceptions of governance vary widely across stakeholders and have little relationship to public expenditure allocations. Perceptions of governance vary widely across stakeholders and have little relationship to public expenditure allocations. High variation across districts in district health spending.Private spending reduced inequality in public health care expenditures High variation across districts in district health spending.Private spending reduced inequality in public health care expenditures Higher spending by districts has led to lower public prices, substitution away from private services and increased Higher spending by districts has led to lower public prices, substitution away from private services and increased