Growth and welfare in mixed health system financing with physician dual practice in a developing economy: a case of Indonesia

Abstract

Based on Indonesia's hybrid BPJS Kesehatan health system, we analyze for welfare-optimal government financing strategy in an economy with a mixed health system using an endogenous growth framework with physician dual practice. We find the model solution to produce two vastly different regimes in terms of policy implications: a "high" public-sector congestion regime as in the benchmark case of Indonesia, and a "low" public-sector congestion, high capacity regime. In the former, welfare-optimal health financing strategy appears to be promoting private health service. In contrast, in the low-congestion, high capacity regime, a welfare-optimal strategy is to do the opposite of increasing government physician wage at the expense of private health subsidy. These results highlight the importance of developing a benchmarking system that measures the actual degree of congestion faced by the public health service in a developing economy, as it ultimately would influence the optimal health financing strategy to be pursued.

Keywords: Dual practice; Economic growth; Health care financing; Welfare.

Fig. 1

A permanent increase in government physician wage rate. An increase in (${\upsilon }_G$) from 0.004 to 0.014 (Percentage deviation for health status; Absolute deviations for others)

Fig. 2

A permanent increase in government spending on private health subsidy. An increase in (${\upsilon }_S$) from 0.022 to 0.032 (Percentage deviation for health status; Absolute deviations for others)