Evaluation of Public Health Insurance for the Poor in Indonesia

1

Muhamad Said Fathurrohman

1. Introduction
In 2005, Indonesian government started providing health insurance for poor people, called
Askeskin. The goal of this program is to increase the poors access to health care services, thus
improving their healthiness, productivity and, more broadly, welfare. Moreover, this program is
also a first step in achieving governments target to provide universal coverage insurance by
2014.
The purpose of this paper is to evaluate the effectiveness of this program in increasing the
healthiness of the targeted beneficiaries, i.e. the poors. Applying difference-in-difference model
and instrumental variable regression on individual level data, it finds that Askeskin program
greatly increase the probability of being health of its beneficiaries. The next section gives the
description of the governments intervention in health insurance in Indonesia. Model and
estimation technique will be discussed in section 3. Section 4 describes the data used and
summarizes variables in the sample. The results of estimation are presented and discussed in
section 4. Last section concludes the paper.

2. Indonesian Government Intervention in Health Insurance
Indonesia has two mandatory health insurance, each of which is managed by different state
own companies. The first is a mandatory health insurance for civil servants called Askes. It
covers all civil servants and armed forces, pensioners of them, and their families. Askes is the

1
First draft of paper which would be submitted as a requirement for master degree in Economics, Andrew Young
School of Public Policy, Georgia State University. Last edited on April 17, 2012.
2

oldest insurance in Indonesia, started from 1968. The second mandatory health insurance is for
private sector employees, based on Social Security Act of 1992. The law grants options for firms
to choose between participating in health insurance scheme operated by state owned company,
Jamsostek, and providing their own insurance or direct medical care.
In September 1998, Indonesian government initiated health cards as a form of targeted
health care subsidy for the poor. It was part of a larger Social Safety Net program to mitigate the
effect of economic crisis to the poors. The unique features of health card program is that the
holders are exempted from the cost of health services at public health care providers and that the
subsidy budget was allocated to districts based on estimated number of eligible households, not
on actual use of subsidy. Pradhan, Saadah, and Sparrow (2007) find that the effects of health
card program mostly due to increased public spending, instead of the feature of price subsidy.
In 2005, government convert health card program into health insurance for the poor, called
Askeskin. In the latter, government no longer pay the subsidy for health care costs directly to
health care providers, but through insurance scheme managed by P.T. Askes Indonesia which
also manages civil employee insurance, Askes. Sparrow et al. (2010) find that Askeskin
increased the poors access to health care in term of utilization of outpatient health care. This
result is robust to various model specifications, including single difference, difference in
difference, and propensity score matching. They also find some evidence of the increase in the
out-of-pocket expenditure of Askeskin insured in urban areas. They conjecture that this
expenditure increase comes from the fact that people in urban areas used Askeskin mainly in
public hospital which is more expensive than public health center; hence, the insured must bear
part of the costs of the services.
3

Despite its proved succeed in increasing the poors access to health care, Askeskin is
replaced with social health insurance program, called Jamkesmas, in 2008. The reasons are the
insufficient budget support from government and the problem in the claim verification. Under
Jamkesmas scheme, government budget is no longer used to pay insurance premium, but
channeled directly to health care service providers, similar to health card scheme prior to
Askeskin. The new features in Jamkesmas is that it uses managed health care concept and covers
not only the poor, but also near poor people.

3. Model and Estimation
There are several possible measurements of the outcome of government pro-poverty
program in health care sector such as Askeskin. Most literatures employs the effect of such
program on the access of the poor to health care services or on their out-of-pocket expenditures
for health care services (see for example: Kruse, Pradhan, and Sparrow, 2012; Hidayat,et. al.,
2004).
This research measures outcome using subjective health state of individuals. The main
advantage of this measurement is that an improvement in healthiness of beneficiaries of the
program is the eventual outcome which is intended by government. Moreover, it has advantage
of summarizing numerous aspects of the health conditions of individuals. Although care should
always be taken in using a subjective variable because it cannot be compared across individuals,
comparison can still be made for its change across time within individuals.
There are abundant unobserved factors affecting individuals healthiness, which may result
in bias to the measurement of the effect of Askeskin program on the chosen outcome variable.
This paper employs difference-in-difference technique to handle some problems with the time
constant and group constant unobserved variables. The model used in this paper is as following.
4

bcoltb = [
0
+ [
1
oskcskin + [
2
otcr + [
3
otcr oskcskin + ycontrol + u
Health is a binary variable the health status of individuals, askeskin is a binary variable
whose value 1 if an individual is a program recipient, and after is another binary variable whose
value 1 for observations coming from post program period. The effect of Askeskin program will
be measured by the coefficient in the interaction variable between askeskin and after. The above
model are estimated using simple OLS regression in order to make it easy to interpret and
directly comparable to the results of instrumental variable discussed later.
Although difference-in-difference method would handle most of problems coming from
confounding factors, some demographic characteristics are employed as additional control
variables, including age and marital status. Because some of non beneficiaries of the program are
very likely to own other insurances, I will also control these other insurance ownership in the
regression.
The biggest threat in evaluating the Askeskin program actually comes from the potential
endogeneity between healthiness and the program entitlement. It is reasonable to expect that
Askeskin benefit would preferably be allocated to people who were found sick during the
identification of beneficiaries. To get around endogeneity problem, I use household expenditures
and individuals community participation as instrumental variables. Household expenditures are
the main determinant for program entitlement. Community participation is very likely increasing
the chance of getting the benefit of the program. Community participation is proxied by
individuals participation in community-based saving and lending, called arisan.
The instrumental variables potentially have some degree of endogeneity too. A healthier
individual has more ability to earn more and participate more in community than a less healthy
5

individual. Hence, whether both variables are the right instruments is a matter of the sample used
in this paper.
4. Data
This paper uses data from the third and the fourth waves of Indonesian Family Life Survey
(IFLS). IFLS is a continuing longitudinal socioeconomic and health survey based on a sample of
households representing 83 percent of the Indonesian population. The first wave of the survey
(IFLS1) was conducted in 1993 covering 7,224 households. In 1997, the second wave (IFLS2)
re-interviewed 94.4 percent of IFLS1 households. One year later, a follow up survey (IFLS2+)
covering 25 percent of the sample was fielded to measure immediate impact of the economic
crisis in Indonesia. The third wave (IFLS3) was administered on the full sample in 2000,
reinterviewing 95.3 percent of IFLS1 dynasties, i.e. original households and their splitoffs. The
most recent wave (IFLS4), conducted in late 2007 and early 2008, recontacted 93.6 percent of
IFLS1 dynasties. This latest wave interviewed 13,535 households and 44,103 individuals.
I build my dataset by merging data on healthiness, Askeskin program participation, and
other demographic caracteristics at individual level, as well as yearly expenditures at household
level. Askeskin program started in 2005, which is between the third and the fourth wave of IFLS.
The treatment group is individuals holding Askeskin in the fourth wave. I build a binary variable,
Askin, whose value 1 indicating these treated individuals and value 0 otherwise.
Both IFLS3 and IFLS4 contain questions on healthiness for adult people. I utilize a question
on subjective healthiness whose value range from 1 indicating very healthy to 4 indicating very
unhealthy. Using subjective healthiness has an advantage of summarizing individuals health
condition which is affected by many factors. Although relative comparison among individuals
6

cannot be made, comparison across time within individual can still be made assuming the
individuals are consistent in assessing their health status.
Table 1 below shows that there is a significant increase in the proportion of individuals
being in very healthy status from 7.9 percent in IFLS3 to 10.5 percent in the IFLS4. On the other
hand, there is also a smaller increase in the proportion of individuals in somewhat unhealthy and
very unhealthy status. The only decrease in the proportion happens only on the somewhat
healthy category.
Table 1. Summary Statistic
2000 2007
Categorical Variables Obs. Percent Obs. Percent
Sickness 25468 29033
- Very healthy 7.88 10.53
- Somewhat healthy 79.2

75.37
- Somewhat unhealthy 12.71

13.77
- Very unhealthy 0.2

0.33
Insured 25325 12.81 29023 25.72
- Askeskin 11
- Nonaskeskin 14.87
Male 25829 47.41 29967 47.83
Arisan participation 25468 29.88
Marital status 25829 29966
- Never 26.24 22.54
- Married 64.73 69.16
- Separated 0.61 0.54
- Divorced 1.94 1.9
- Widow 6.48 5.87
Continuous Variables Obs. Mean Std. Dev. Min Max
age 2000 25825 36.3 16.5 11 115
age 2007 29962 36.9 15.6 14 100
expenditures 2000 (million) 25901 13.4 14.8 0 381
expenditures 2007 (million) 30008 26.3 22.8 0 286

People with insurance in 2000 was only 12.8 percent of the sample, but in the late 2007, this
number was already doubled into 25.7 percent. Most of the increase is attributed to newly
7

insured from Askeskin program, which constitute 11 percent of the sample. The average of
household expenditures in a year almost doubled from 13.4 million rupiahs in 2000 to 26.3
million rupiahs in 2007. Individuals participating in arisan comprise almost 30 percent of the
2000 sample.
There is little difference between average age of individuals in 2000 and that in 2007
although the duration between survey waves is seven years. It happened most likely because
some of the oldest individuals surveyed were died between both survey waves. Married
individuals were about 65 percent of the 2000 sample and about 69 percent of the 2007 sample.
Never-married individuals are the second largest group in the both samples, with 26.2 percent
share of the 2000 sample and 22.54 percent share of the 2007 sample.

5. Results and Discussion
The results of simple OLS are presented on Table 2 below. Column 1 shows the results of
simple bivariate regression of healthiness on the binary variable indicating the group of Askeskin
recipients, applied only to the 2007 sample. An entitlement of Askeskin decrease the probability
of being healthy by 3.2 percentage points, holding other else constant. Although the marginal
effect is small in magnitude, it is statistically significant at 1 percent level.
The results from difference-in-difference (DID) regression on the pooled 2000 and 2007
sample is presented in column 2. The group of Askeskin recipients are on average 3.0 percentage
points less healthy than the group of non recipients. The similarity of the coefficient on Askeskin
group dummy in this DID regression with that from bivariate regression indicates that most of
the marginal effect in the latter comes from the sample differences in healthiness between the
recipients and non recipients of Askesin. The difference between the healthiness of Askeskin
8

recipients group and that of non recipients group do not significantly change from 2000 to 2007,
only by 0.6 percentage points. However, the health condition of both groups tends to worsening,
with the probability of being health in the 2007 sample is 2.1 percentage points less than that in
the 2000 sample.
Table 2. Linear Probability Models

(1) (2) (3)
VARIABLES OLS DID DID

after*askeskin -0.006 -0.001
(0.010) (0.010)
after -0.021*** -0.022***
(0.003) (0.003)
askeskin -0.036*** -0.030*** -0.022***
(0.007) (0.008) (0.008)
nonaskin 0.015***
(0.005)
age -0.003***
(0.000)
male 0.033***
(0.003)
never -0.036***
(0.005)
separated -0.044*
(0.026)
divorce -0.035**
(0.014)
widow -0.027***
(0.010)
constant 0.863*** 0.884*** 0.995***
(0.002) (0.003) (0.007)
Observations 29,020 44,943 44,937
R-squared 0.001 0.002 0.023
Notes: Robust standard errors in parentheses, *** p<0.01, ** p<0.05, * p<0.1.

Adding control variables to the DID regression only slightly changes the main results,
although it greatly increases the model's capability in explaining variation on the health status
among the sampled individuals. The Askeskin recipient groups now is only 2.2 percentage points
less probable of being health compared to non recipient. Individuals in the 2007 sample also
9

have 2.2 percentage points less probability of being health than the 2000 sample, so there is
almost no change from the results of simple DID regression. The estimate of the post program
change in the difference of health probability between Askeskin beneficiaries and non
beneficiaries after additional control is still not significant, even less than in the simple DID
regression, decreasing by only 0.1 percentage points.
Table 3 below presents the results of two stage least square regression employing
households' expenditures and individuals' arisan participation as instrument for Askeskin
participation. From the results of bivariate TSLS regression on the 2007 sample shown by
column 1, the Askeskin beneficiaries is 27.7 percentage points less probable of being healthy
than non beneficiaries. The estimated difference is way much larger than that from simple OLS.
The result of endogeneity tests shows that askeskin participation variable is highly endogenous,
both robust score chi-square and robust regression F are significant at 1 percent level. Test of
overidentifying restriction does not reject the moment restriction, showing that both instrumental
variables are valid.
However, much of this difference seems to come from the initial condition of both groups,
as reflected by little difference in the group coefficient between simple model and DID model,
when both are estimated using instrumental variables. In the DID model shown in column 2, the
Askeskin beneficiaries group is on average 29.3 percentage points less likely to be healthy than
non beneficiaries group. Individuals in the 2007 sample were 7.5 percentage points less likely to
be healthy than those in the 2000 sample. Despite being statistically insignificant, the post
program gap between the expected healthiness of Askeskin beneficiaries and that of non
beneficiaries is largely reduced by 15.3 percentage points. The endogeneity test shows that
10

Askeskin is endogenous. However, overidentifying restriction test rejects the null hypothesis of
exogeneity of instrumental variables at 1 percent level of significance.


11

Table 3. Two Stage Least Square Regressions

(1) (2) (3)
VARIABLES 2SLS 2SLS+DID 2SLS+DID

after*askeskin 0.153 0.445***
(0.099) (0.067)
after -0.075*** -0.078***
(0.013) (0.009)
askeskin -0.277*** -0.293*** -0.269***
(0.068) (0.055) (0.062)
nonaskin -0.031***
(0.009)
age -0.004***
(0.000)
male 0.030***
(0.004)
never -0.058***
(0.005)
separated -0.045*
(0.025)
divorce -0.034**
(0.014)
widow -0.023**
(0.009)
constant 0.874*** 0.914*** 1.057***
(0.009) (0.008) (0.010)
Observations 15,834 41,549 41,547
R-squared 0.005 0.035
Exogeneity of askeskin Rejected Rejected Rejected

2
score from overidentifying
restriction test

0.905 7.619*** 38.333***
Notes:
Robust standard errors in parentheses, *** p<0.01, ** p<0.05, * p<0.1.

After adding control variables to the TSLS regression shown in column 3, the estimated
impact of Askeskin program becomes much larger and highly significant at 1 percent level. The
post-program expected healthiness of Askeskin beneficiaries group is estimated to increase 44.5
percentage points relative to the change in expected healthiness of non-beneficiaries group,
holding other factors equal. The coefficients of group and time dummy only slightly change after
adding control variables. Individuals in 2007 has 7.8 percentage points less probability of being
12

health than in 2000, and those of Askeskin beneficiaries tends to have less probability of being
health than non beneficiaries by 27 percentage points. The endogeneity test here again shows
that Askeskin is endogenous. Overidentifying restriction test strongly rejects the null hypothesis
of exogeneity of instrumental variables at 1 percent level.
To summarize, the use of instrumental variables results in the expected sign of the
difference-in-difference coefficient of Askeskin program. It shows that it is the endogeneity of
askeskin variable which causes the wrong sign in the simple OLS estimation.
The fact that controlling for age, marital status, and ownership of non-askeskin insurance
largely increase the magnitude and significancy of the estimated DID coefficient indicates that
the Askeskin entitlement may be assigned to individuals who are at disadvantage in terms of
those control variables. Askeskin tends to be assigned to old people who is more likely to be
sick, thus creating downward bias to the estimated DID coefficient in the simple regression.
Non-married people may also be more likely to get Askeskin benefit, and they are estimated to
be less likely to be health, thus creating another downward bias to the estimated DID coefficient
in the simple regression.

6. Conclusions
This paper evaluated the effectiveness of Indonesian governments Askeskin program,
which provides health insurance for the poors, in term of how much it increase the likelihood of
self-perceived healthiness. After handling the endogeneity and unobserved factors problems, it is
found that Askeskin program greatly increases the likelihood of being healthy.
Difference-in-difference model is employed to remove possible biases from unobserved
time constant and time common factors. The potential endogeneity of the program variable,
13

caused by the likely assignment of the benefit based on individuals state of health, is solved
using arisan participation and household expenditures as instrumental variables. Indeed, the
results of endogeneity test on the Askeskin variable strongly rejects the null hypothesis of
exogeneity. However, the instrumental variables used in two stage least square regression do not
consistenly pass the overidentifying restriction test. Hence, the results should be taken with
caveat because the instruments seems not to have strong exogeneity.
The result of this paper consistent with most previous literatures evaluating the impact of
Askeskin. The result implies that more resources can be spent to such program as Askeskin.
Indeed, it is what Indonesian government is trying to do, by expanding the coverage of
government insurance to also include the near poor through the new initiative called Jamkesmas
which started in 2008. Future research may evaluate the effectiveness of this new program.

14

References


Hidayat, B., H. Thabrany, et al. (2004). "The effects of mandatory health insurance on equity in
access to outpatient care in Indonesia." Health Policy and Planning 19(5): 322-335.
Kruse, I., M. Pradhan, et al. (2012). "Marginal benefit incidence of public health spending:
Evidence from Indonesian sub-national data." Journal of Health Economics 31(1): 147-157
Pradhan, M., F. Saadah, and R. Sparrow (2007) Did the Health Card Program Ensure Access to
Medical Care for the Poor during Indonesias Economic Crisis? The World Bank Economic
Review 21 (1): 125 150
Sparrow, R., A. Suryahadi, W. Widayanti Social Health Insurance for The Poor: Targetting and
Impact of Indonesias Askeskin Program. SMERU Working Paper, May 2010.
Strauss, J., F. Witoelar, B. Sikoki and A.M. Wattie. The Fourth Wave of the Indonesia Family
Life Survey (IFLS4): Overview and Field Report. March 2009. WR-675/1-NIA/NICHD.
Strauss, J., K. Beegle, B. Sikoki, A. Dwiyanto, Y. Herawati and F. Witoelar. The Third Wave
of the Indonesia Family Life Survey (IFLS3): Overview and Field Report. March 2004.
WR-144/1-NIA/NICHD.