Strengthening primary health care financing through public financial management reform in Indonesia

Indonesia is undertaking significant health care reforms aimed at strengthening primary health care services, but challenges in managing public finances are hindering progress. Despite increased public spending, fragmented financial management systems are limiting the effective and efficient use of resources at the local level.

Reforms Underway, But Obstacles Remain

Driven by Law No. 17 of 2023 on Health and Minister of Health Regulation No. 19 of 2024, the country is working to improve primary health care. However, financing continues to be dispersed through multiple channels, each with its own rules for allocation, disbursement, and reporting. This fragmentation impacts budget execution and reduces the flexibility of puskesmas – primary health care facilities – to respond to local service delivery needs.

A Review of Bottlenecks

To address these issues, the World Health Organization (WHO), in collaboration with national authorities and academic partners, conducted a detailed review of the obstacles within Indonesia’s public financial management (PFM) systems. The findings were compiled into a policy brief intended to guide decision-makers at both the national and subnational levels.

The policy brief identified several key challenges throughout the budget cycle. These include fragmented financing flows, inconsistent rules for costing and allocation, delays in disbursement, limited flexibility in how funds can be used, and a lack of integration between financial data and service delivery data. These issues contribute to underutilization of resources and inconsistent performance among puskesmas.

Recommendations for Improvement

The policy brief recommends 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. It also highlights the potential benefits of granting puskesmas “BLUD” (badan layanan umum daerah) status, which provides greater autonomy and is associated with more efficient resource management.

Prastuti Soewondo, senior advisor to the Indonesian minister of health on health financing, emphasized the importance of BLUD status, stating, “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.”

What’s Next?

Strengthening PFM is considered essential to ensure that increased health spending translates into better and more equitable primary health care. A possible next step could involve pilot programs to test the recommendations outlined in the policy brief, particularly regarding the implementation of BLUD status for puskesmas. Analysts expect that continued collaboration between the WHO and Indonesian authorities will be crucial in translating policy insights into practical improvements. Further reforms embedded within broader health system transformation could lead to improved efficiency, responsiveness at the facility level, and progress toward universal health coverage.

Frequently Asked Questions

What are puskesmas?

Puskesmas are primary health care facilities in Indonesia.

What is BLUD status?

BLUD (badan layanan umum daerah) status is a designation that provides greater autonomy and flexibility for puskesmas in planning and using resources, while maintaining accountability.

What is the role of the WHO in these reforms?

The WHO, together with national authorities and academic partners, conducted a review of public financial management bottlenecks and synthesized the findings into a policy brief to inform decision-makers.

How might improved financial management impact healthcare access for Indonesian citizens?