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Indonesia Tackles Health Funding Fragmentation to Boost Primary care Access
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Despite increased public investment, inefficiencies in Indonesia’s public financial management (PFM) systems are hindering the effective delivery of primary health care services. new reforms, enshrined in Law No. 17 of 2023 on Health and Minister of Health Regulation No.19 of 2024, aim to address these challenges and strengthen primary care access for all citizens.
Indonesia is undergoing meaningful health system reforms, but a key obstacle remains: the dispersal of funding across numerous sources, each with its own rules for allocation, disbursement, and reporting. This fragmentation impacts budget execution, limits the flexibility of local health facilities, and ultimately restricts their ability to meet the evolving needs of the communities they serve.
WHO Report highlights PFM Bottlenecks
To support these ongoing reforms, the World health Organization (WHO), in collaboration with Indonesian national authorities and academic partners, conducted a comprehensive review of the existing PFM bottlenecks. The findings, synthesized into a policy brief, pinpoint critical issues throughout the budget cycle.These include fragmented financing flows, inconsistent costing methodologies, delayed fund disbursement, limited flexibility in how funds can be used, and a lack of integration between financial data and service delivery information.
These issues contribute to the underutilization of available resources and inconsistent performance across puskesmas, Indonesia’s community health centers. A senior advisor to the Indonesian Minister of Health stated, “BLUD status expands the decision space for puskesmas by allowing greater flexibility in planning and using resources based on local needs, while maintaining accountability through clear governance and oversight mechanisms. This balance between autonomy and accountability is critical for improving responsiveness and service quality at the primary care level.”
The Promise of BLUD Status and Decentralization
The policy brief recommends several key strategies to overcome these challenges. These include strengthening integrated budgeting processes, improving the predictability and speed of fund disbursement, increasing flexibility in fund utilization, and enhancing financial and performance reporting at the facility level. A especially promising solution highlighted in the report is the adoption of badan layanan umum daerah (BLUD) status for puskesmas.
BLUD status grants greater autonomy and flexibility to these facilities, which has been shown to correlate with more efficient resource allocation. This approach aligns with broader efforts to decentralize healthcare financing and empower local providers.
International collaboration and Future steps
Indonesia’s engagement in the 7th Meeting of the Montreux Collaborative on Fiscal Space, Public Financial Management and Health Financing, held at WHO Headquarters in Geneva from December 1-5, 2025, further underscored the nation’s commitment to these reforms. Indonesian delegates actively participated in discussions focused on aligning PFM with primary health care financing, promoting provider autonomy, and strengthening accountability mechanisms.
The WHO Director-General, Dr. Tedros Adhanom Ghebreyesus, addressed these issues during his opening speech at the 7th Montreux Meeting on PFM and Health Financing, December 1-3, 2025. (Credit: WHO/Feby Oldfisra).
Looking ahead, the WHO will continue to support Indonesia in translating these policy insights into tangible improvements. This support will focus on strengthening analytical capacity, facilitating cross-country learning, and leveraging PFM evidence to inform health financing and primary care reforms at both the national and subnational levels. Strengthening PFM is essential to ensure that increased public spending on health
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