12 Sep 2023
New Legislation to Kick Start Much Needed Health Sector Reform in Indonesia

With Indonesians spending an eye-watering Rp 100 trillion (USD 6.6 billion) on overseas healthcare every year, the government and national parliament have finally moved to institute a number of much-needed reforms to the domestic health sector, notwithstanding entrenched opposition from the country’s doctors.

The reforms are set out in a new omnibus health law (Law No. 17 of 2023) that entered into force on 8 August 2023 (“Health Law 2023” or the “new legislation”),[1] replacing a total of 11 separate statutes governing the health sector, including the previous Health Law and the Healthcare Professionals Law.[2] An impressive piece of work, the new legislation consists of 458 articles arranged into 20 chapters.

The Health Law 2023 introduces a number of important changes, including greater opportunities for foreign-trained healthcare professionals to practice in Indonesia, a significant change that is intended to boost the quality of healthcare in the country and to kick start the development of a medical tourism industry. Other important reforms include the establishment of an integrated national health information system, as well as an independent disciplinary body to handle malpractice and other disciplinary violations.

Before we commence our analysis, the first thing to be said is that the new legislation distinguishes between “Medical Professionals” and “Other Health Professionals” – the former comprises doctors and dentists, while the later essentially consists of all other healthcare professionals, excluding support staff (Medical Professionals and Other Health Professionals are henceforth collectively referred to as “Healthcare Professionals”).

Given the extensive array of topics addressed by the Health Law 2023, we have confined our analysis to the following selected key aspects:

A.  More Relaxed Licensing Requirements

The Health Law 2023 simplifies the rules as regards the two key licenses that must be obtained by all Healthcare Professionals: the Registration Certificate / Surat Tanda Registrasi (STR) and the Practicing license / Surat Izin Praktik (SIP). For example, the validity of an STR is extended from 5 years to lifetime validity, and a number of burdensome requirements for obtaining an STR and SIP are eliminated. In particular, a recommendation is no longer required from the relevant professional organization in support of an SIP application.

To accommodate the changes made by the new legislation as regards STR and SIP, the Minister of Health recently issued a circular to update licensing procedures as a stopgap measure until such time as the necessary implementing regulations can be issued.[3]

B.   Greater Opportunities for Overseas-trained Healthcare Professionals to Practice in Indonesia

The basic rule under the new legislation is that all non-Indonesia-trained Healthcare Professionals need to undergo competency tests and obtain an STR and SIP before they can practice in Indonesia.

However, in the case of overseas-trained Healthcare Professionals who are Indonesian nationals, these requirements are dispensed with provided that:

1. the person concerned is a graduate of a recognized overseas academic institution, and has a minimum of 2 years’ experience practicing overseas; or
2. is an expert in a particular medical or healthcare field, as evidenced by a certificate of competency.

In perhaps the most controversial aspect of the Health Law 2023, the requirements can also be dispensed with in the case of overseas-trained Healthcare Professionals who are not Indonesian nationals provided that:

1. the person concerned is a graduate of a recognized overseas academic institution, with a minimum of 5 years’ experience of practice overseas, as evidenced by a certificate/document issued by the authorities in the relevant country; or
2. is an expert in a particular medical or healthcare field, as evidenced by a certificate of competency, with a minimum of 5 years’ experience of practice overseas.

In order to practice in Indonesia, non-Indonesian, overseas-trained Healthcare Professionals must receive an invitation from a healthcare facility, and are only permitted to work on a 2-year contract, extendable for a further 2 years, making a total of 4 years. However, those who plan to practice in a Special Economic Zone may be permitted to work for longer periods. For just how long is not specified in either the body of the Health Law 2023 or its Elucidation.

In this regard, the Government recently established a Special Economic Zone focused on medical tourism in Sanur, Bali, and plans to soon set up another in Batam, just a stone’s throw from Singapore, as part of an overall drive to emulate the medical-tourism success of other nations in Southeast Asia, such as Thailand and Malaysia.

Under the previous Health Law, it was extremely difficult, if not impossible, for non-Indonesian Healthcare Professionals to practice in Indonesia, and that is precisely the way the country’s doctors would have liked to keep it. Hence, the outbreak a slew of unprecedented street protests by Indonesia’s normally reserved physicians in the run-up to the new legislation’s enactment.

C.  Establishment of National Health Information System

The Health Law 2023 envisages the establishment of an integrated national health information system, managed by the Ministry of Health, that will integrate all of the existing health information systems operated by central and local government, healthcare facilities, and the community at large (both individuals and groups) – such as telehealth and telemedicine providers, the organ transplantation information system, and hospital information systems – and allows the public to access both public and personal information contained in the National Health Information System, in accordance with the prevailing data management regulations.

The new legislation requires that the protection of personal health data and information be guaranteed by health information system operators, and that the processing of personal health data must be approved in advance by the data owner and/or comply with the relevant legislation and regulations on data processing.

Subject to the personal data protection legislation and regulations, a data owner is also granted certain rights as regards the management of their personal health data, e.g., the right to be informed of the purpose of data collection, to access and correct data/information, to request a transfer of data, to have inaccurate data deleted, etc.

D. Greater Regulation of Medical Technology

Since the enactment of the old Health Law in 2009, the field of medical technology, including biomedical technology, has developed and grown beyond all recognition. This is acknowledged, applauded and encouraged by the Health Law 2023, which puts in place various requirements and safeguards so that the sector can develop optimally.

As an example of the approach taken by the new legislation in this area, it provides that clinical specimens, material or data obtained from a patient for scientific purposes as part of the application of biomedical technology may only subsequently be used with the owner’s consent. Further, it goes into significant detail in describing how such clinical specimens and biological material should be stored and managed. In addition, all relevant information and data relating to these specimens and material should be stored domestically and be integrated with the National Health Information System.  

E. Abolition of Mandatory Health Sector Spending

The Health Law 2023 revokes the requirement under the old Health Law that at least 5% of the State Budget (APBN), and a minimum of 10% of a regional government[4] budget (APBD), be allocated to the health sector. As to what replaces this requirement, unfortunately this is far from clear. All we can glean from the text of the new legislation is that the central government is required to provide funding for national programs identified in the “health sector master plan” using a performance-based budgeting approach, whilst regional governments are obliged to fund local programs identified in the health sector master plan using the same approach, having regard to local spending priorities.

As to what the “health sector master plan” is, the new legislation only tells us that it is a document prepared by the Ministry of Health in consultation with the House of Representatives (Dewan Perwakilan Rakyat / DPR).

F. Professional Discipline

In a new departure that will be warmly welcomed by a public, the Health Law 2023 takes the issue of professional malpractice in the health sector out of the hands of the various professional associations and assigns it to a new disciplinary council to be established by the Minister of Health. The council will have the power to impose sanctions that include the issuance of written warnings or instructions to undergo mandatory training or further education, temporary suspension of an STR, or a recommendation that an SIP be revoked.

Healthcare Professionals are also subject to criminal sanctions for offenses they commit when providing healthcare services, the imposition of which requires a recommendation from the disciplinary council.

Decisions of the disciplinary council are appealable to the Minister of Health.

Further issues regarding the disciplinary council are to be addressed by way of government regulation.

ABNR Commentary

While the Health Law 2023 has been slammed by many (with Indonesia’s normally staid physicians even taking to the streets in noisy protests), we believe that there is much in it to be welcomed. However, as always in a trickle-down system of legislation like Indonesia’s, quite a number of implementing regulations will need to be issued before the new legislation can be put fully into effect. It will be interesting to see whether these anticipated regulations will entirely support the new legislation’s reformist ethos or whether the ongoing pushback by vested interests will result in some watering down of its provisions.

From the perspective of investors, perhaps the most significant aspect of the new legislation is the greater opportunities it provides for foreign doctors to practice in Indonesia, something that is an essential prerequisite for the development of both a medical tourism industry, and world-class medical services that cater to the needs of the Indonesian public.

From the perspective of ordinary Indonesian people, the establishment of a new disciplinary council that is independent of the professional organizations will be warmly welcomed. With egregious incidences of malpractice hitting the national headlines on an almost daily basis, it is to be hoped that the new council will act firmly and be sufficiently well-resourced to uphold professional discipline and ethics in the health sector.

As for the decision to abolish minimum budgetary allocations in the health sector, this has been criticized, with the usual complaints of “commercialization” being widely aired. However, it actually makes sense to abolish mandatory minimum spending as throwing money at a problem is no guarantee that the money will be wisely spent or that the problem will be fixed, especially given widespread planning, staffing and implementation constraints at both the central and local levels.

On the downside, the Health Law 2023 gives what some say is an excessively dominant role to the Ministry of Health, at the apparent expense of the professional organizations. Indeed, the legislation appears to deliberately set out to weaken the professional organizations.

The reduced role accorded to the professional organizations is shown by, among other things, the fact that it is no longer compulsory for each healthcare profession to be represented by a sole professional organization, or to even establish a professional organization at all (the new legislation states that professional organizations may be established, rather than must be established). Given how representative organizations have splintered and mushroomed in other professions in Indonesia, often becoming little more than vehicles to advance personal interests, it would be both disappointing and worrisome to see the same thing happen in the health sector.

By partner Mr. Agus Ahadi Deradjat (aderadjat@abnrlaw.com), Mr. Adri Dharma (adharma@abnrlaw.com), senior associate Ms. Karina Widyaputri (mwidyaputri@abnrlaw.com), and  associate Ms. Jesslyn Joevy (jjoevy@abnrlaw.com)

This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.