Will the proposed AKSN work?
Will the proposed AKSN work?
Hans Vriens, Managing Director, APCO Indonesia, Jakarta
Recently a plenary session of the legislature reviewed a new
draft bill to introduce a national health insurance in Indonesia,
the so-called AKSN (Asuransi Kesehatan Sosial Nasional). The aim
of this scheme is to provide improved, basic (but unspecified)
health care services in Indonesia. It is being presented as a way
of providing free health care to all Indonesians, including the
poor and the needy. No doubt a popular proposition for
politicians, in particular in view of the upcoming elections.
There can be little doubt that there is room to improve basic
health care services. However, what will be the consequences of
the introduction of an expensive compulsory national health
insurance? Can the country afford it, and who is likely to
benefit? Is it a dream come true or could it all end in tears?
Let's look at the major features of the legislation that
according to the Minister for Health will be introduced before
the end of this year:
o Participation in this scheme will be compulsory for all
Indonesians and residents of Indonesia for longer than 180 days,
including foreigners.
o There are no opt-outs or salary caps, even for Indonesian
middle and upper management, and foreigners who will most likely
not use the scheme at all.
o There will be a payroll deduction of 6 percent to be paid by
employer and employee. But employees will expect the employer to
foot the bill.
o Companies may, at their discretion, provide health services
(insurance, clinics etc.) over and above the basic services
provided for by the law but will, nonetheless, still be required
to contribute to the payroll deduction.
o The government will pay the contributions for the poor and
needy commencing at an unspecified date.
o A trust fund and an implementing body, similar to the social
insurance firm Jamsostek, will be established to manage this
multi-billion dollar program. It will collect contributions and
be responsible for providing the medical services. The
implementing body will have representative bodies in all
regencies.
National health insurance schemes all over the world are in
financial trouble. Even rich Asian countries like South Korea and
Taiwan have come to the conclusion they can't afford it. The
drain on the government budget is too big.
Health costs in Germany are so out of control that the German
government and opposition agreed this summer to the biggest
social service overhaul since reunification in 1990 with plans to
slash health costs by US$26 billion per year.
The funding needed for the AKSN is estimated to be $6.5
billion per year of which the government's contribution is
estimated to be $3.1 billion. There is no clear indication as to
where this government money will come from and how it will be
budgeted.
In other words, the scheme will not benefit the poor. The
government simply doesn't have the money. The poor and unemployed
may be covered by AKSN one day, but we are unlikely to witness
that day in our lifetime.
What kind of services can employees expect -- employees who
suddenly have to cancel their existing health insurance and are
forced to move to this new national government scheme. According
to health care specialists the answer is simple: AKSN will deliver
unspecified second-rate treatment by second-rate providers.
Experience in other countries where similar schemes have
failed also teaches us that providers like doctors, and hospitals
will prioritize "paying patients". This will represent a lower
standard of care than that provided by existing health insurance
arrangements.
Private health care providers are not in favor of such an
approach and the scheme will not attract them, either hospitals
or specialists. Therefore, to ensure first class coverage for
employees, employers will be required to maintain existing health
insurance arrangements and the 6 percent compulsory payroll
contribution will in effect become just another tax.
It is also unclear why we need a new trust fund and an
implementing body, while the official policy is to privatize
existing state-owned companies. It is possible that this fund,
which will manage at least $3 billion a year could become the
victim of corruption, collusion and nepotism. Comparable state
owned firms like Jamsostek and ASKES (health insurance) have a
far from unblemished track record.
A recent study conducted by the International Labor
Organization ILO entitled Restructuring the social security
scheme in Indonesia found that the average value of a Jamsostek
pension only amounts to 5.5 months of the recipients' basic
salary or 8.5 months of the current minimum wage.
These workers would earn a better rate of return on their
investment if they put their retirement savings into a bank
account rather than putting it into the Jamsostek scheme.
Besides there have been numerous allegations about corruption
in Jamsostek. The Confederation of All-Indonesian Workers Union
lashed out at political parties and accused them of looting
Jamsostek. They charged that during its 26 years of operation
Jamsostek has been "repeatedly used as a cash cow by certain
groups."
After the new manpower law, companies already have a total
payroll deduction of around 12 percent to fund Jamsostek and
retirement provisions. With another 6 percent for this scheme
and, potentially, an additional as-yet unspecified amount for the
new social security bill, the labor cost to employers is becoming
unrealistic.
So far it isn't entirely clear who would benefit for AKSN
besides possibly the people who are going to manage these
billions of dollars. It is obvious that Indonesia needs to
improve health care for the poor and unemployed. This could be
achieved by prioritizing the improvement of the many thousands of
community health centers all over the country, that now often
have no medicine and no doctors. This is likely to be more
effective than trying to build another Tower of Babel.
PT APCO Indonesia is a wholly-owned subsidiary of APCO
Worldwide, a Washington-based firm specializing in government
relations and communications.