Like South Korea, Thailand, and other countries in the region, Indonesia rolled out foundational provider payment reform with its national health insurance scheme, Jaminan Kesehatan Nasional (JKN). Years of research show that the use of capitation-based payments for primary care is the most cost-effective way to deliver a set of services; thus, Indonesia adopted this into JKN.

This rollout entailed several different types of payment mechanisms focused on maximizing efficiency, reducing moral hazard, and guaranteeing delivery of benefits to Indonesians. Capitation in Indonesia has not only attracted additional enrollees, but it has also limited the overuse of resources and made care more efficient. But this progress is hampered by under-provision of services, referrals to higher-level providers for non-specialist care, and limited success in prioritizing less expensive health promotion and prevention.

To address these ongoing issues, Indonesia has taken a multi-faceted approach. The government has adapted diagnosis-related group (DRG) systems from countries like the United States and Australia and some European nations to fit their local context, needs, and capacities. The government has also pursued performance-based capitation to incentivize fewer unnecessary referrals. Though these initiatives have received mixed results so far, there is a rich trove of lessons to be taken from Indonesia’s experience with blended provider payment systems. And these lessons can be applied to nations across the globe.

In our latest Counterpoint webinar on June 12, we explored the topic of provider payment reforms in Indonesia and future direction with a tight focus on integrated health system reforms.

Watch the recording

In this edition, ThinkWell’s Nida Hameed, a Technical Advisor in Pakistan, hosted a panel of four local experts:

  1. Dr. Hasbullah Thabrany, MPH, DrPH, the Chief of Party for ThinkWell-implemented USAID Health Financing Activity and a leading public health and health financing expert, covered the background and economic concepts behind prospective provider payments within JKN.
  2. Dr. Atik Nurwahyuni, SKM, MKM, a health financing expert at Universitas Indonesia and a leading technical advisor on provider payment reforms and health financing to MOH, presented and discussed the rationale and the process of setting INA-CBG and DRG payments.
  3. Prof. Dr. Ali Gufron Mukti, MSc, PhD, the Director of BPJS-Kesehatan Indonesia, presented IT support, pay-for-performance mechanisms, and recent achievements in provider payment initiatives.
  4. Dr. Ahmad Irsan A. Moeis, SE, ME, the Head of the Center for Health Financing Policy and Decentralization for the Indonesia Ministry of Health, presented how the government set capitation amounts and INA-CBGs to ensure effectiveness and efficiency in JKN payments.

Some questions that were addressed during the webinar include the following:

  1. How has Indonesia effectively integrated different provider payment methods to incentivize high-quality care delivery while controlling costs for different types of providers and facilities?
  2. What are the key system capacities required for continued provider payment reforms and how do these considerations differ across different priority health areas?
  3. What types of incentive structures and ‘experiments’ has Indonesia done to incentivize quality of care and performance? Which have worked?
  4. With the health transformation agenda and shift to an integrated and life cycle-, promotion-, and preventive care-focused health system, what changes will Indonesia need to make to provider payment processes achieve those goals?

Thanks to all who joined. If you missed it, please take a look at the recording here!

How USAID HFA assisted the Government of Indonesia in improving COVID-19 health financing efficiency.

For more than three years, citizens and governments around the world have endured COVID-19. It has posed a unique challenge to national governments to rebalance the three dimensions of everyday life that it most impacts: economy, society, and health. In the face of continuous uncertainty brought on by this unprecedented crisis, Indonesia’s leaders have created strategies to ensure efficiency and economic resilience while also safeguarding the wellbeing of communities. One of these strategies is identifying the most effective health financing system. Efficient and equitable health financing not only saves money, but it also increases coverage for patients otherwise neglected by outdated systems.

To identify and hone this system, the Government of Indonesia (GOI) collaborated with USAID Health Financing Activity (HFA) to build evidence and consensus among stakeholders across the government and health sector. Building on the powerful partnership between USAID and the Ministry of Health (MOH), countless hours of research, discussion, and revisions were conducted to adapt the health financing system to the nuances of a pandemic.

The initial shock of a global pandemic

In March 2020, Indonesia reported its first confirmed case of COVID-19. In the following weeks— characterized by a sense of uncertainty, fear, and rapidly evolving circumstances—almost every aspect of life was impacted. In an instant, the government’s top priority became providing care to COVID-19 patients as quickly as possible. The GOI took measures to protect citizens and finance their medical services. But hospital beds rapidly filled, and access to vital resources dwindled. Normal or routine health procedures quickly became untenable under the burden of COVID-19.

As hospital reimbursement claims piled up, the need for a formulation of a more efficient payment system was clear. Guided by reimbursement and cost data from four large hospitals—Dr. Soetomo Regional Public Hospital Surabaya, Sulianti Saroso Infectious Disease Hospital, Fatmawati Central General Hospital, and Persahabatan Central General Hospital—the GOI decided on a per-diem scheme for reimbursement.

The system reimbursed health care providers or hospitals for all treatment they provide patients—medication, equipment, tools, consumables—in a single day. The reimbursement amount, or “tariff,” was set by MOH. The per-diem tariff scheme served as a quick fix to ensure the GOI was fully reimbursing hospitals as they cared for an overwhelming patient load as the patients arrived. Over the coming months, however, the weight of cases exceeded expectations and the system couldn’t keep up.

A method for better spending and faster care

Cases continued to increase, and so did the costs of reimbursements. The costs doubled to IDR 204.9 trillion (nearly US$13.5 billion) between December 2021 and December 2022, leaving public health officials wondering if the high charges from hospitals were a true reflection of the upward trend in cases. MOH requested USAID HFA to perform an evidence-based task analysis to support its decision-making process.

Lia Mahmud, nurse at Koja Hospital, Jakarta, Indonesia, August 2022; Credit: Syane Luntungan for ThinkWell

For two years prior to COVID-19, USAID HFA, implemented by ThinkWell, had been working to build evidence and capacity within the GOI to support MOH in generating and utilizing evidence to inform policy processes, including optimizing the National Health Insurance Scheme (NHIS). When the MOH tapped USAID HFA, the program immediately began assisting the government to generate a robust, timely, and efficient health financing payment scheme for the COVID-19 response in Indonesia.

“Calculating how much the correct real cost was for COVID-19 needs actually required finding the real costs for each unit,” said Dr. Yuli Farianti, MOH Center of Health Financing and Decentralization Policy (Pusjak PDK) Head. Between 2020 and 2021, HFA carried out a study to determine the actual costs of treating COVID-19. “That’s when we began to see the relevance of how the case-based groups (CBGs) might work in this situation,” she said.

The COVID-19 CBGs scheme was modeled after the CBGs payment method that has been applied for other disease areas since 2014. The system charges health care expenses in a package, per instance of care. Each package covers the entire treatment cycle from when a patient tests positive for COVID-19 until their discharge from a health facility. The amount of reimbursed expense per package varies based on severity level, which incentivized hospitals to treat patients quickly and according to each patient’s unique needs

USAID HFA’s technical and analytical assistance made it possible to reconfigure the reimbursement formula so that public funds were utilized effectively, and openness and transparency were promoted among hospitals. The new tariff was enacted in an MOH decree on October 1, 2021.

A policy that changes with the circumstances

Dr. Yuli highlighted that shifting to CBGs improved spending patterns and budgeting. “Before CBGs, [the rates] were calculated unit by unit, from masks to medicine, and beyond,” said Dr. Yuli. “Afterwards, [the expenses were] added to the daily rate of medical service. At the end of the day, expenses surged. CBG is a package service. They take everything into account, from equipment to medical consumables to services and others all under a particular CBG package code.”

COVID-19 continued to rapidly evolve, epidemiologically and clinically, and the development of less severe variants, vaccination, and herd immunity led Pusjak PDK to seek further revisions to the CBG tariff amounts. The Omicron variant required fewer resources, so USAID HFA worked with MOH to adjust the tariffs to reflect the provided health treatment.

According to Dr. Yuli, the process presented two challenges: formulating the new tariffs and implementing them in hospital operations. At the end of the day, however, hospitals across the nation recognized the public good represented by the new tariff structure and have since implemented the new scheme.

Moving forward and a shift to endemic



The World Health Organization’s Strategic Preparedness and Response Plan: April 2023–April 2025 will end the emergency phase of the COVID-19 pandemic in all countries and shift from emergency response to sustainable comprehensive management of the disease. As she reflected on the current declining trend in COVID-19 deaths and hospitalizations, Dr. Yuli expressed her hope that COVID-19 will be incorporated into the NHIS covered diseases soon. “Notwithstanding future challenges, we have to take into account the sustainability of the NHIS,” she said. Since the time of writing, COVID-19 has been deemed endemic in Indonesia and has automatically been included in NHIS coverage.

Dr. I-ing Ichsan (Director of Regional 5 Hermina Hospital Group), Jakarta, Indonesia, August 2022; Credit: Syane Luntungan for ThinkWell

Dr. Yuli is grateful for USAID HFA’s assistance throughout its three-year collaborative journey with MOH  to find the most effective COVID-19 financing and adjusting the tariffs accordingly. “It is very significant,” she said. “If we don’t work with USAID, it will definitely be more difficult for us. It was such a great help in many aspects, such as the studies and many more…The process was much faster and more efficient with the help of HFA including the process of revising [the tariff]. Moreover, hospitals and other stakeholders have been supportive. Maybe without their help we wouldn’t be able to finish this fast.”

“HFA helped us do the tariff calculation, they taught us what to formulate, how to release the data, how to conduct analysis, and generate tariff calculation,” Professor Abdul Kadir, Head of the Supervisory Board of the Indonesia Social Security Agency on Health.

The successes of this project will act as an example for the MOH’s policy endeavors going forward. The teamwork fostered by USAID HFA between stakeholders and experts to create efficient policy and improved internal capacity will hopefully benefit the health care system of Indonesia as it continues to grow and adapt to whatever circumstances arise.

Header image: Puskesmas Setiabudi, Jakarta, Indonesia, July 2023; Credit: Ardy Rahmatullah for ThinkWell