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Decentralisation, performance of health providers and health outcomes in Indonesia

Maharani, Asri

[Thesis]. Manchester, UK: The University of Manchester; 2015.

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Abstract

Health reformers, especially in developing countries, have applied decentralisation to enhance the performance of health systems which in turn improve health outcomes. Proponents of decentralisation argue that increasing the authority of local government promotes resource allocation according to local needs. Yet critics point out that decentralisation is harmful as resources are more likely to be redistributed in favour of poorer areas in countries with centralised governments. Shedding light on those endless debates, this study aims to examine the association between decentralisation, performance of health providers and health outcomes in Indonesia. In 2001 Indonesia embarked on decentralisation in the form of devolution and fiscal decentralisation. Devolution transfers the responsibilities of providing health services from central government to local government, while fiscal decentralisation allows local government to manage its local economies. Following those reforms, Indonesia raised the authority of public hospitals’ managers through corporatisation in 2004. Those reforms aim to provide better health services for the population. Evaluating whether all three forms of decentralisation in Indonesia have achieved their aim or not, this study uses both primary and secondary data. The primary data was collected in 54 public hospitals in East Java province during summer 2013. The secondary data combined individual and household level data and local government data. The Indonesia socio-economic survey (Susenas) 2004-2013 and Indonesian Family Life Survey (IFLS) 2007 are the sources of individual and household data, while the national village census (Podes) 2003-2010 provides district-level data. I supplement these with local government fiscal data from the Ministry of Finance and the consumer price index 2004-2013. The assembled data possesses a multilevel structure in which individuals or households are nested within districts. The main findings show that health outcomes among Indonesians continue to vary across districts after decentralisation. Passing authority down from central government to lower-level institutions does not automatically bring about better performance of health providers and health outcomes regardless of the type of authority devolved and the characteristics of the delegated institutions. However, further analysis on multiyear data suggests that there is an important learning curve throughout the process of decentralisation implementation. Both local governments and hospital managers need time to learn how to utilise the authority they are given after decentralisation. These findings suggest that improving capacity and accountability of local authorities and an understanding of why some local authorities are better than others at learning during the process of decentralisation are vital to improve performance of health providers and health outcomes in decentralised Indonesia.