Mandatory Spending in Indonesia’s Health Sector Set to be Unleashed


In a significant development, the mandatory spending allocation in Indonesia’s health sector is expected to undergo a transformation. The Director General of Budget at the Ministry of Finance, Isa Rachmatarwata, recently announced that the previously fixed percentage for mandatory spending in the health sector will no longer be in effect.

This means that the allocation, which was conventionally set at 5% of the State Budget (APBN) and 10% of the Regional Budget (APBD) excluding salaries, will now be freed from its constraints.

While the specific percentage for mandatory spending in the health sector will no longer be stipulated in the newly enacted Health Law, it doesn’t mean that health expenditure will be disregarded.

Isa emphasized that the budget for healthcare will continue to be an integral part of the government’s financial plan, ensuring that it is appropriately allocated based on the evolving needs of the sector. Although it may no longer be classified as mandatory spending as per Article 171, Paragraphs (1) and (2) of Law No. 36 of 2009, it will still receive due consideration in the State Budget (APBN).

The decision to eliminate the fixed percentage for mandatory spending reflects a broader objective to optimize the utilization of funds. By removing the rigidity of the allocation, the government aims to eliminate unnecessary expenditures and ensure that every allocated fund has a clear and defined purpose.

Over the years, it has been observed that certain health expenditures have been directed towards activities that do not directly contribute to the improvement of public health. Isa’s statement highlights the need to address this issue and foster a more targeted and purposeful approach in healthcare expenditure.

While the removal of the specific percentage offers greater flexibility in budget allocation, it also raises questions about the precise amount that will be dedicated to the health sector.

To address these concerns, Isa affirmed that the government remains committed to allocating a substantial portion of the budget to healthcare. Although the specific percentage is no longer fixed, the government’s commitment to meeting the healthcare needs of the population remains unwavering.

Isa further emphasized the government’s intention to ensure that the health budget aligns with the needs of both the people and the nation. This commitment is intended to safeguard the quality of healthcare services provided to the population. It is important to note that the revised allocation will not fall below the minimum amount stipulated in Law No. 36 of 2009 on Health.

The government’s goal is to strike a balance between flexibility in allocation and ensuring that sufficient funds are available to support the health sector’s requirements.

Minister of Health, Budi Gunadi Sadikin, shed light on the rationale behind removing the specific percentage for mandatory spending. President Joko Widodo’s keen attention to healthcare expenditures prompted the government to review the allocation framework. The intention was to address concerns regarding the lack of clarity in the utilization of the 5% health expenditure, which was consistently fully utilized but without a transparent breakdown of its purpose.

The newly enacted Health Law, designed as an Omnibus Law, introduces a program-based and outcome-oriented approach to healthcare budget allocation. This approach aims to enhance transparency, efficiency, and accountability in the utilization of healthcare funds, guided by the Health Sector Master Plan currently being formulated by the government.

The approval of the Health Law by the People’s Representative Council (DPR) marks a significant milestone in Indonesia’s healthcare reform. With 11 existing health-related laws being amended through this comprehensive legislation, the government and the DPR have demonstrated their commitment to improving healthcare in the country.

The extensive discussions held and the active participation of various stakeholders reflect a collaborative effort to ensure that the health sector is adequately supported and equipped to meet the evolving needs of the population.

The process leading to the enactment of the Health Law has been characterized by extensive public engagement and participation. The government has undertaken numerous initiatives, including public discussions and consultations involving a wide range of stakeholders and experts.

Through platforms such as the Healthy Participation portal, which has received a substantial number of written and oral inputs, the government has been receptive to the public’s views and recommendations. This inclusive approach has not only facilitated the development of a comprehensive Health Law but has also instilled a sense of ownership among the diverse participants involved in shaping the future of healthcare in Indonesia.

As the Health Law comes into effect, it heralds a new era for healthcare expenditure in Indonesia. With a more flexible and outcome-driven approach, the government seeks to optimize the utilization of funds, ensuring that every allocated rupiah contributes meaningfully to the nation’s health.

The elimination of the fixed percentage for mandatory spending demonstrates the government’s commitment to transparency, efficiency, and accountability in healthcare budget allocation. As the implementation unfolds, it is anticipated that the revised approach will enhance the effectiveness of healthcare expenditures, ultimately leading to improved healthcare outcomes and better access to quality services for the Indonesian population.