Interventions to improve health status are an important policy instrument in Indonesia’s overall strategy in alleviating poverty and improving the welfare of the country's population. The system for planning and financing public services including health care in the country, as in many developing countries, is highly centralized. Growing awareness of the obstacles associated with this centralized structure has generated much interest and a number of government initiatives in decentralization. The decentralization policy is advocated as a means to promote efficiency and responsiveness of the government programs and to strengthen community participation. This paper attempts to assess the extent of decentralization efforts in Indonesia and its impacts on sustainability of health care services at local levels.

There have been numerous decentralization initiatives in planning and fiscal programs implemented by the government of Indonesia in the last three decades. An important political effort of the Government of Indonesia in promoting the decentralization was reached in 1974, when Law No.5, titled "The Republic of Indonesia: Elucidation of Basic Principles of Administration in the Regions" was established. The law outlines the main principles for the development of regional autonomy and provides legal basis for regional administration including for broad involvement of subnational units in provision of public services including public health care. In the early 1970s the Government of Indonesia initiated a broader grant program chartered by the Presidential Instruction (INPRES) intended for social and economic development expenditure.

The Indonesian experience demonstrates the decentralization has taken the form mainly of limited delegation, with little 'real' decentralization (devolution). Elements of deconcentration and devolution exist, however, through general purpose grant, specific grant, and local governments' own funds. The central transfer for health, education, and infrastructure has contributed significantly in improving equity of health facilities and health status. The centrally-directed, one-size-fits-all program of public health service development, mainly financed by the central transfer program, has been instrumental in achieving the national goal of ensuring that certain basic health infrastructure is available throughout the country. However, once such primary needs have been met, it will become increasingly difficult to formulate a uniform health program that satisfies local needs in such a varied country as Indonesia. In addition, the demographic, economic, epidemiological transitions experienced by the country in the last four decades have contributed to the complexity. Underutilized health facilities, prevalence of unequal health outcomes, and the low cost recovery are main constraints of the centralized structure that might impede the sustainability of the health care delivery.

A number of pilot programs of decentralization in health care delivery implemented by the government have indicated potential benefits --more equitable, more efficient and better cost recovery--which are important elements in sustaining the public service at local levels. Sustainability of the health care delivery in the country can be potentially achieved by providing a greater degree of decentralization in planning and fiscal to local governments.

Given current political conditions demanding a higher degree of local autonomy and common the obstacles to recent decentalization efforts in sustaining the provision of health care at local levels, further decentralization policies should continue to emphasize: (1) providing more expenditure responsibilities to local governments in the provision of public services including public health, (2) improving regional resource mobilisation by providing more local revenue responsibilities, (3) promoting equitable development by involving widespread regional participation in health planning activities, (4) improving the intergovernmental transfer by increasing proportion of the general block grant, (5) strengthening local capacity in human resources and institutions; and (6) promoting private participation in provision of health care.