Published by Oxford University Press in association with The London School of Hygiene and Tropical Medicine Health Policy

cy and Planning 2008;23:188199

The Author 2008; all rights reserved. Advance Access publication 11 March 2008 doi:10.1093/heapol/czn003

Targeting the poor in times of crisis: the

Indonesian health card
Robert Sparrow

Accepted 16 January 2008

This paper looks at targeting performance of the Indonesian health card

programme that was implemented in August 1998 to protect access to health
care for the poor during the Indonesian economic crisis. By February 1999,
22 million people had received a health card. The health card provided a user fee
waiver for public health care. Targeting of the health card was pro-poor, but
with considerable leakage to the non-poor. Utilization of the health card for
outpatient care was also pro-poor, but conditional on ownership, the middle
quintiles were more likely to use the card.

Targeting of the health card followed a decentralized design combining

geographic targeting with community-based targeting instruments. This design
facilitated the rapid implementation of the programme, but targeting perfor-
mance suffered from a lack of information on the regional impact of the crisis,
while at local level not all barriers to accessing health care services were
overcome by the health card. Indirect and direct costs of seeking health care
seem to be the main deterrent to using the health card, and are higher in more
remote areas.
Micro-simulations show that geographic targeting can contribute considerably to
improving targeting performance, but most of the targeting gains are to be made
at the local level, with district programme management and public health care
providers.
This study highlights the need for adequate and up-to-date social welfare indi-
cators. In addition, further research would need to focus on how local know-
ledge can be utilized for signalling poverty dynamics and local barriers to access.
Keywords Access, economic crisis, Indonesia, outpatient care, poverty, price subsidy,
targeting

Institute of Social Studies, P.O. Box 29776, 2502 LT The Hague,

The Netherlands. E-mail: sparrow@iss.nl

188
 TARGETING THE POOR IN TIMES OF CRISIS 189

KEY MESSAGES

Price subsidies are effective in improving access to public health services, but they need to be complemented by other
interventions that reduce indirect costs and other barriers to utilization of public health care, such as supply-side
impulses or reduction in transport costs.

Geographic targeting can contribute considerably to improving targeting performance, but potential gains in targeting
performance through higher accuracy of geographic poverty indicators are modest. Most of the targeting gains are to be
made with local programme operation and public health care providers.

For targeting of future safety nets and crisis responses in Indonesia, the need for adequate information systems is
apparent. While a decentralized programme design can prove flexible and effective in a crisis situation, up-to-date
information and early signalling of economic shocks and crisis effects are crucial.

Introduction the loss of control over the allocation process. Decentralized

In an attempt to protect access to health care utilization for
the poor during the Indonesian economic crisis, a nationwide
health programme was introduced in August 1998, as part of
the larger Indonesian Social Safety NetJaring Pengaman Sosial
(JPS). This health care programme included a targeted price
subsidy that operated through the so-called health cardKartu
Sehat. Households that were thought to be most vulnerable to
economic shocks were allocated health cards, which entitled all
household members to the price subsidy at public health care
providers. The programme followed a partly decentralized
targeting process, involving both geographic and community-
based targeting instruments.
The success of such crisis interventions depends critically on the
ability to identify and reach the poor, in particular those that are
most vulnerable to the effects of a crisis. Successful targeting
requires information on welfare and crisis impact for individual
households. Typically, collecting such disaggregated information
centrally is costly. The administrative capacity for providing
welfare details for each household (for example, a centralized tax
administration) is often not available in developing countries like
Indonesia. Moreover, short-term information regarding the crisis
effects for individual households would be hard to retrieve even
under a highly developed administrative system. For example, in
case of the Indonesian crisis, Skoufias et al. (2000) find evidence
of considerable movement in and out of poverty from 1997 to
1998, hindering accurate targeting of the poor.
The decentralized design of the JPS programmes is meant to
deal with this targeting problem. The combination of geographic
and community-based targeting instruments provides an alter-
native infrastructure for gathering and processing information
locally, and disseminating this to higher administrative levels.
Several authors have argued that a decentralized design can
benefit from local knowledge and community participation, on
the premise that local officials and community members are more
capable of identifying the poor.1 Not only do they have better
access to information on targeting criteria, they are also more able
to prioritize amongst the set criteria or even formulate new local
criteria that better reflect the policy objectives.
However, decentralization has its weaknesses. Recently, a
number of theoretical and empirical studies have investigated
the implications and pitfalls of different aspects of decentraliza-
tion (e.g. regional political or fiscal autonomy). A main concern
is that the benefits of using local knowledge are offset against
programmes are prone to local elite capture and suffer from
classic principal-agent dilemmas (e.g. Bardhan and Mookherjee
2000, 2005; Galasso and Ravallion 2005). In a comprehensive
review of the empirical literature on targeting, Coady et al.
(2004) find that geographic and community-based targeting
perform above average, but with a large variation between the
individual projects.
This paper deals with the targeting of the JPS health pro-
gramme, in light of the decentralized design. The objective is to
investigate how the programme has been implemented and who
were the beneficiaries of the health cards. Have health cards been
allocated to the poor or is there evidence of leakage or local
capture of benefits by the non-poor? Particular focus will be on
the effectiveness of regional targeting policy in contrast to local
(within-district) targeting by the allocation committees. What
factors underlie the observed patterns of targeting performance?
Has the centre been able to identify the regions hit hardest by the
crisis? What determines targeting at local level?
Besides allocation of health cards, the analysis will focus on
utilization of the cards, conditional on receipt. The potential
benefits of a health card are only reaped if the card is used. Are
there barriers unabridged by the health card? Would changes in
targeting regime lead to corresponding distributional changes in
utilization of health cards?
Finally, a micro-simulation-based decomposition method is
employed to attribute overall targeting performance to geographic
and local targeting instruments. This methodology allows us
to (1) compare the effectiveness of different geographic target-
ing rules (relative to random targeting), (2) compare the effect-
iveness of geographic and local targeting instruments and
(3) measure the scope for potential improvements for targeting
performance at different stages of the targeting mechanism.
The next section sets the context of the programme and
contains a detailed description of the programme design.
The following section proposes the methodology and describes
the data. The results are then presented and discussed, before
concluding.
The Indonesian economic crisis and
the JPS health card programme
The Indonesian economic crisis was triggered by a financial
crisis that hit Southeast Asia in mid 1997. In 1998, real GDP
190 HEALTH POLICY AND PLANNING
decreased by roughly 14% and poverty rates increased drama-
tically.2 According to estimates by the Indonesian Bureau of
Statistics (BPS), the poverty headcount increased from 17.7% in
1996 to 23.5% in 1999.
At the onset of the Indonesian financial crisis an important
concern was whether the achievements made in the social sectors
over the past decades could be sustained. The crisis saw a sharp
decrease in the utilization of outpatient health care from 1997 to
1998. Outpatient utilization rates for modern health care dropped
from 0.193 visits per person per month to 0.142 visits, with
utilization of public care declining from 0.095 to 0.064.3 This
declining utilization of public services was concentrated with
local public health clinics. A major cause of the decline in public
health care utilization was a shortage of drugs and supplies
during the crisis and a subsequent deterioration in quality of
public care (Frankenberg et al. 1999; Knowles et al. 1999; Waters
et al. 2003). Knowles and Marzolf (2003) report cutbacks in public
health spending due to reduced government revenues during the
crisis. The lack of operational funds and shortage of drugs
disrupted services in public health care facilities in 1998. In 1999
public health care utilization showed slight signs of recovery,
which was partly attributed to the JPS health card programme
(Pradhan et al. 2007).
The health card programme was a main component of the
social safety net, which was initiated in the autumn of 1998
with the aim of safeguarding real incomes and access to social
services for the poor.4 The health card existed before the onset
of the crisis, but its use had been negligible. A health card
entitled a household to free services at public health care
providers consisting of (1) outpatient and inpatient care,
(2) contraceptives for women of child bearing age, (3) pre-
natal care and (4) assistance at birth. This study is limited to
outpatient health care utilization.
The public health care providers where the health cards could
be used received budgetary support. These grants were meant to
compensate for the expected demand due to the health card
and to maintain quality of health care. However, there was a
loose relationship between the utilization of the health card and
the compensation that the health care providers received in
return. Compensation was allocated based on the estimated
number of households eligible for the health card programme
rather than actual utilization of the health cards. The 1998/1999
budget for JPS health grants to primary health centres
(Puskesmas) and village midwives (Bidan di desa) amounted to
US$29 million, financed by the Government of Indonesia and
the Asian Development Bank.
The JPS health programme followed a decentralized design,
with part of the targeting and allocation process delegated
to district administrations, villages officials and public health
care providers. But while the motivation of the JPS health
programme was to shield access to health care from the effects
of the economic crisis, at the time of implementation no
information was yet available on the regional variation in the
intensity of the crisis. This lack of information hindered
geographic targeting. In the absence of income or expenditure
data (both at district and household level), other measures of
welfare were used instead. The number of health cards and the
amount of compensation to health care providers was therefore
determined by a prosperity measure for 307 districts (urban kota
and rural kabupaten), provided by the National Family Planning
Coordinating AgencyBadan Koordinasi Keluarga Berencana
Nasional (BKKBN). This prosperity measure is a poverty head-
count ratio, defining a household as poor if it fails one or more
of the following five basic needs criteria: households (1) can
worship according to faith, (2) eat basic food twice a day, (3)
have different clothing for school/work and home/leisure
activities, (4) have a floor that is made out of something
other than earth, and (5) have access to modern medical care
for children or access to modern contraceptive methods. The
BKKBN collects this information nationwide on a census basis.
The BKKBN prosperity measure has been criticized for being
an unsuitable allocation rule for the JPS, since its components
are fairly inflexible and inappropriate for measuring economic
shocks or the impact of a crisis on individual incomes.5
However, at the time of programme design the BKKBN pro-
sperity measure for December 1997 was the most up-to-date
welfare measure at hand. The BKKBN measure was also used
as an allocation rule for both the budgetary support to facilities
and health cards to households.
Targeting within districts followed a two-stage process.
Special district committees allocated compensation funds to
public health care providers according to the estimated number
of health card eligible households living in the area served by
the provider. Health cards were allocated to villages, again
based on the BKKBN measure, and subsequently distributed to
eligible households through local health centres and village
midwives. Eligible households were those that were considered
poor following the BKKBN classification. In addition, targeting
of households relied heavily on local knowledge by allowing
local health officials and community members to define addi-
tional criteria according to their own insights regarding the
effects of the crisis.
The decentralized targeting design shows clear elements of
community-based targeting as the programme is implemented
by a mix of local officials and community members, who
determine eligibility for the health card programme, engage in
the distribution of health cards or take part in the monitoring
process.6 In this regard the analysis fits within the community-
based targeting literature. On the other hand, the notion of a
community may not exactly match the context of the JPS
programme. Districts in Indonesia are large geographic units,
within which the targeting mechanism encompasses a multi-
level design and network of intermediate agents that may go
beyond the notion of community-based targeting. In the
remainder of the paper I will therefore refer to local and
with-district targeting, instead of community-based targeting.
Methodology and data
Benefit incidence analysis and targeting
performance
The analysis starts with a static benefit incidence analysis of
health card allocation and utilization, and then investigates the
factors driving observed benefit incidence patterns by focusing
on the targeting instruments and barriers at three layers of the
targeting process: the central management unit (inter-district
targeting), the geographic unit (intra-district targeting)
and the household (utilization through self selection).

Table 1 Targeting process of the JPS health card programme
Targeting phase Actors Objectives/decisions
Phase 1: CMU, Jakarta Target districts
Phase 2: District committees Target public health care
providers and households
Phase 3: Households Self targeting: utilization
of health cards
Finally, geographic targeting performance is linked to indivi-
dual heath card allocation and utilization by simulating tar-
geting regimes.
The benefit incidence analysis describes the coverage and
concentration of receipt and allocation of health cards, and how
this varies by economic status. Coverage reflects the percentage
of the population participating in the programme, while the
concentration measure indicates how the benefits are distrib-
uted across the population. Targeting performance is defined as
the ability of the programme to reach the poor, that is, to what
extent the coverage and concentration indices show a pro-poor
relative to a distribution neutral pattern.
As the economic crisis was the main motivation for the JPS
interventions, an indicator of economic welfare is used as a
yardstick for targeting performance. In this case, monthly
household expenditure per capita is a more suitable indictor for
economic welfare than income, as it can be seen as an outcome
of a consumption smoothing process reflecting income, asset
base and economic shocks, as well as the ability of households
to deal with these shocks. Following an expenditure-based BPS
poverty headcount of 23.4%, the poorest population quintile
roughly corresponds to the share of the population living below
the poverty line. The volatility in expenditure-based poverty
found by Skoufias et al. (2000) and Suryahadi et al. (2003)
suggests that the bulk of the second poorest quintile lives close
to the poverty line.
Table 1 shows the different targeting phases, with the main
actors, decisions and actions, targeting instruments and main
barriers. In the first targeting phase the district BKKBN measure
was the main targeting instrument of the central management
unit in Jakarta. The main question here is whether the BKKBN
prosperity measure reflects the expenditure-based poverty profile
and the geographic heterogeneity of the crisis impact. It is
important to note here that it is not the aim of this paper to
explore which welfare measure is a better reflection of poverty,
as they clearly follow different dimensions and definitions of
deprivation. Rather, this analysis aims to illustrate the difficulty
of geographic targeting given the limited information available
at the time, and, in particular, how the choice of geographic
targeting criteria affects distributional outcomes. This will then
also shed light on the scope for targeting improvements through
geographic poverty indicators.
For the second targeting phase, the determinants of within-
district targeting are scrutinized by means of multivariate
analysis, at household level. A probit is estimated for the
TARGETING THE POOR IN TIMES OF CRISIS 191
Targeting instrument Barriers

BKKBN 1997
No crisis information

Welfare indicator quality

Local BKKBN data
Lack of crisis information

Local knowledge in sub-districts, villages and individual
households

Elite capture

Self selection
Lack of access

Needs
Perceptions, stigma

Crowding out
probability of receiving a health card (hcjk) conditional on
geographic targeting:

  
Pr hcjk 1 Pr hcjk > 0


Pr
1 Xjk
2 BPSk
3 BKKBN k "jk > 0 1
where Xjk reflects the characteristics and village conditions for a
household j (in district k) that may be considered as local
targeting criteria. BKKBNk contains targeting criteria for sub-
districts and districts. Although it was not an official targeting
rule, the model also controls for the BPS district poverty
headcount, as irregularities in allocation were correlated with
the average level of poverty. The error term "jk reflects
unobserved factors affecting targeting. The marginal effects
can be interpreted as reflecting intra-district targeting since the
district targeting rules have been controlled for.7
The benefits of the health cards are acquired through the
associated price subsidies at public health care providers. But
even if households receive a health card there may still be
barriers to using it, and thus to enjoying the benefits. The
incentive to use a health card for obtaining health care could
be reduced by a lack of information, regional shortage of
providers, stigmatization, or opportunity costs unabridged by
the health card. Such barriers are likely to vary by households
and are likely to be higher for the poor. To this end, the third
stage of the targeting process is considered through probit
analysis of the determinants of health card utilization (hcuijk)
conditional on ownership:

  
Pr hcuijk 1 Pr hcuijk > 0


Pr 1 Xijk 2 BPSk 3 ijk vijk > 0 if hcjk 1 2
The unit of analysis is the individual. Xijk contains the same
variables as in equation (1), in addition to gender and age
of individual i. Since the model is estimated for health card
recipients, and health card allocation was not random,
consistency of the  estimates could be compromised by
selection effects. Potential sample selection is investigated by
including the selection term  E(" | hc 1). Under the
normality assumptions of a probit analysis,  is the inverse
Mills ratio computed from the health card allocation probit
estimates. However, there is no evidence of selection effects, as
3 is small and not statistically significant.8 To facilitate
identification of selection effects, the BKKBN district and
sub-district targeting variables are excluded in equation (2).
These regional BKKBN indicators were used for geographic
192 HEALTH POLICY AND PLANNING
targeting but should not play a role in the individuals decision
to use the health card.9
Micro-simulation
To separate geographic from local targeting performance,
I follow Alatas and Pradhan (2003) who propose an approach
based on micro-simulation to attribute changes in targeting
performance to specific targeting stages. Targeting performance
is measured as deviation from a distribution neutral outcome.
Through the simulation method this deviation can be decom-
posed into a district and local targeting effect, and different
geographic targeting regimes can be compared. This will show
how local targeting performs on its own, and whether there is
scope for geographical targeting in reallocation of health cards
to the poor.
Denote the outcome of a two-stage targeting process by the
distribution D(G, L), where G and L reflect the geographic and
local targeting regime, respectively. The performance of these
regimes will be assessed by comparing the outcome D(G, L)
with a hypothetical non-targeted outcome, D(G0, L0). This
neutral targeting outcome is driven by a uniform geographic
targeting regime where allocation to districts simply depends on
population size (G0) and random allocation of health cards
within districts (L0). Under this regime the probability of
receiving a health card is the same for everyone. Overall
targeting performance can then be decomposed such that the
difference between a specific targeting regime and random
allocation can be attributed to the geographic and local
targeting instruments separately:





DG, L  D G0 , L0 DG, L  D G0 , L D G0 , L  D G0 , L0
|{z} |{z} Household characteristics include demographic information
geographic targeting local targeting
This decomposition method thus requires three counterfactual
outcomes for each targeting regime to be assessed: (1) the
outcome for a specific targeting regime, D(G, L), (2) the
neutral outcome based on random allocation, D(G0, L0), and
(3) the counterfactual outcome D(G0, L) where between-district
targeting is based on population shares but within-district
targeting is based on the targeting priorities observed in the
probit analysis. The latter two will effectively be the same for
each geographic targeting scenario, while D(G, L) can refer to
the actual observed outcome or a simulated outcome for any
alternative geographic targeting regime.
The estimation results from (1) and (2) are used to simulate
targeting outcomes D(G, L) and D(G0, L). The simulation
exercise comes down to using the probit estimates for ranking
households within districts in terms of eligibility. Households
are selected into the programme according to their eligibility
rank until the district quota is reached. Several geographic
targeting regimes are then imposed by changing the number of
households selected for the programme in each district, keeping
the overall size of the programme constant. That is, the
districts share in the programme is altered, not the total
amount of health cards. The analysis will consider two
counterfactual within-district eligibility ranks: the rank based
on the probit estimates (L) and a random allocation (L0).
In order to rank households within districts, the probit
estimates are not sufficient; the unobserved errors are also
needed. To see this, consider equation (1): hc* can be
interpreted as latent programme eligibility, where the eligibility
threshold of selection is normalized to zero. This latent
eligibility can be constructed from the probits linear prediction
and the unobserved error term. Therefore the errors are drawn
from a truncated standard normal distribution, such that

^ 1 Xjk
^ 2 BPSk
^ 3 BKKBNk "~jk > 0 if household j received a
health card, and the opposite if otherwise.10 A similar approach
is taken for utilization: conditional on health card allocation to
households under a specific geographic targeting regime, an
individuals utilization behaviour is evaluated according to the
linear prediction of the utilization probit (2) and error v~ijk . In
this way it is possible to track the effects of regional
redistribution of health cards to household level allocation of
health cards, and then to individual utilization of the health
card for outpatient care.
Data sources
The key source of data is Indonesias main socio-economic
survey (Susenas). The Susenas is conducted annually on a
national scale, collecting information on health care utilization,
socio-economic background of individuals and households, and
detailed information on household expenditures.11 In 1999,
a special JPS module was included, which covered 202 089
households and 822 607 individuals.12 This module provides
information on household and individual participation in each
of the JPS programmes. The Susenas survey is fielded in
February, so the JPS module only reflects programme coverage
during the initial 6 months of implementation. The first health
cards were distributed in the fourth quarter of 1998.
such as household composition and the gender of the head of
household. Besides per capita expenditure quintile and the five
factors that determine BKKBN prosperity status, the survey
covers socio-economic information such as the main source of
income for the household, education of the head of household
and living conditions. Household-specific shocks are partly
reflected by employment status of the head of household and
a variable indicating whether daily activities of a household
member were disrupted due to illness in the past month. The
Susenas also provides some information on the village
characteristics where the household resides, such as rural/
urban and the IDT village classification.13
A 1996 village census (Podes) provides pre-intervention data
on the availability of health care facilities in each village (desa)
and urban precinct (kelurahan) in Indonesia. The Podes includes
66 486 of these communities and can be merged with the
Susenas data. The village variables used in the analysis reflect
access to health care: the number of public health facilities
located in the village, the number of doctors and midwives that
live in the village (per 1000 inhabitants), and a variable
indicating the village leaders opinion on accessibility of health
facilities in the village.14
Finally, I use data on the geographic targeting criteria and
household expenditure-based poverty. This includes the percen-
tage of BKKBN poor households in districts (December 1997)
and in sub-districts (January 1999). The expenditure-based
poverty headcount ratios are computed by BPS based on the
1996 and 1999 Susenas.15
 TARGETING THE POOR IN TIMES OF CRISIS 193

Table 2 Distribution of health card allocation and utilization for

Results and discussion outpatient care during past 3 months, 1999
Benefit incidence
Health card allocation Health card utilization
The health card programme was already of a substantial (amongst Indonesian (amongst health
magnitude in February 1999, with 10.6% of Indonesians population) card recipients)
living in a household with a health card. Health card recipients Incidence (%) Share (%) Incidence (%) Share (%)
show a higher utilization of outpatient care than non- Quintile 1 18.45 33.74 6.51 33.28
recipients. The difference is largest with utilization of public (poorest)
care. Amongst health card recipients, 15.1% visited an out- Quintile 2 13.71 25.68 6.54 25.43
patient provider during the 3 months prior to the survey. For Quintile 3 10.61 20.06 6.84 20.79
non-recipients this is lower, at 12.9%. Although health card Quintile 4 7.09 13.41 6.78 13.77
owners tend to choose public providers more often, they do not
Quintile 5 3.71 7.10 6.25 6.72
always use their health card. About a third of the health card (richest)
owners who sought care at a public provider reported not to
Urban 7.23 26.79 6.65 26.89
have used the health card.
Rural 12.82 73.21 6.62 73.11
What could explain the weak link between ownership and
utilization? Providers were not reimbursed based on actual All 10.62 100.00 6.63 100.00
services provided, but on the predicted demand. Possibly, the No. of observations: 822 607.
providers themselves selected who they deemed in need for
subsidized services and did not always honour the rule that
those who could present a health card should be provided free wealthier than those who received the card. Barriers of access
services. Alternatively, rich households may decide to forgo the to health care seem higher for the poor. Nevertheless, even
option of free health care, preferring the higher quality private though the non-poor are more likely to use their health card
facilities instead of the public health care centre. when they have one, most of the benefits still accrue to the
Strauss et al. (2004) show that at some public health clinics poor because the initial distribution of the health card is
not all services were covered by the health card, but that skewed towards the poor. Almost three-quarters of the health
this cannot fully explain the under-usage of health cards. cards are distributed in rural areas. But relative to this
Qualitative research by Soelaksono et al. (1999) found that at distribution, the use of the cards is similar between rural and
some public facilities, the time allocated to patients with a urban areas.
health card was limited, and that in remote areas the lack of
access to the nearest public facility was a possible deterrent to
use the health card. They also found indications that patients Geographical targeting and crisis impact
perceived the care received using a health card to be of lower To what extent did the district targeting criteria reflect regional
quality than services and medicines obtained when not using differences in expenditure-based poverty and impact of the
the health card. In addition, the public perception was that crisis? Several studies have raised concerns about the lack of
treatment at the public clinic was less effective than at private up-to-date information available for geographic targeting (e.g.
providers. Ananta and Siregar 1999; Daly and Fane 2002; Dhanani and
Health cards distribution is pro-poor, as shown in Table 2. Islam 2002; Pritchett et al. 2002). Given the heterogeneous
Amongst the poorest 20% of the population, 18.5% had a health nature of the crisis, it is likely that pre-crisis information would
card. Incidence of health card receipt drops as per capita miscalculate the degree of poverty in the districts during the
expenditure increases, from 13.7% in the second quintile to crisis. There are two reasons for this. First, the crisis gave rise to
3.7% in the richest quintile. The allocation shares for ownership large relative price changes, between products (especially food)
and utilization are presented in columns 3 and 5 of Table 2. The and across regions (Cameron 1999; Friedman and Levinsohn
poorest 20% of the population own 33.7% of the health cards. 2002; Frankenberg et al. 2003). This variation would be ignored
Still, there is considerable leakage to the more wealthy in the targeting process when pre-crisis poverty estimates are
households. Considering that about 10.6% of the population applied as allocation rules. Secondly, the effects of the crisis
received a health card, perfect targeting would imply that all varied strongly between regions and were only weakly
health cards are concentrated with the poorest quintile. correlated with the initial level of poverty (Sumarto et al.
However, the wealthiest 60% of the population own 40.6% of 1998). This heterogeneity of the crisis impact is shown in
the health cards. Figure 1, which plots 1996 expenditure-based poverty against
Utilization of health cards for outpatient care shows a less the change from 1996 to 1999. The difference between 1996
pro-poor distribution than allocation. The inverted U-shaped and 1999 estimates reflects the impact of the crisis. It indicates
pattern of utilization of the health cards, with small differences the absolute change in the fraction of people that moved into or
between quintiles, corresponds closely with the pattern of out of poverty during the crisis. In line with Sumarto et al.
overall utilization of public outpatient services. Note that (1998), there appears to be no correlation between the initial
utilization of modern outpatient care is strongly correlated level of poverty and the impact of the crisis.
with income, but this is mainly driven by the differences in The BKKBN data are collected at more frequent intervals than
private care, not public (Lanjouw et al. 2002). Conditional on the household expenditure surveys. Although criticized for
having a health card, the middle quintiles are more likely to use suitability, they can provide fairly up-to-date information, as far
it. This means that those who received benefits were on average down as the household level. Nevertheless, the December 1997
194 HEALTH POLICY AND PLANNING

Lowess smoother, bandwidth = 0.8 Table 3 Provinces ranked by poverty measures according to BPS and
0.2759 BKKBN headcount

BKKBN 1997 BPS 1996 BPS 1999
BPS 99-96

Province % (rank) % (rank) % (rank) % (rank)
Change BPS 19961999

Aceh 51.65 (18) 12.72 (8) 14.75 (6) 2.03 (11)

North-Sumatra 27.56 (3) 13.23 (9) 16.74 (8) 3.51 (14)
West-Sumatra 33.89 (7) 9.84 (5) 13.24 (3) 3.40 (13)
Riau 35.97 (10) 12.62 (7) 14.00 (4) 1.38 (5)
Jambi 29.67 (4) 14.84 (11) 26.64 (17) 11.80 (25)
South-Sumatra 41.27 (12) 15.89 (12) 23.53 (14) 7.64 (20)
Bengkulu 43.22 (16) 16.71 (14) 19.79 (12) 3.08 (12)
0.0494 Lampung 60.72 (22) 25.59 (21) 29.11 (20) 3.52 (15)
0 0.7089 Jakarta 17.32 (2) 2.35 (1) 3.99 (1) 1.64 (9)
BPS poverty rate 1996
West-Java 33.25 (6) 11.06 (6) 19.78 (11) 8.72 (23)
Figure 1 Correlation between initial poverty in 1996 and crisis impact Central-Java 54.30 (19) 21.61 (17) 28.46 (18) 6.85 (18)
on BPS poverty headcount for districts (locally weighted regression with
0.8 bandwidth) Yogyakarta 34.57 (9) 18.43 (16) 26.11 (15) 7.68 (21)
East-Java 42.24 (14) 22.13 (18) 29.48 (21) 7.35 (19)
Bali 0.00 (1) 7.81 (2) 8.53 (2) 0.72 (3)
BKKBN data would still miss part of the regional variation in NTB 62.49 (23) 31.97 (23) 32.95 (23) 0.98 (4)
the crisis impact.
NTT 82.68 (26) 38.89 (24) 46.73 (25) 7.84 (22)
Table 3 illustrates the difficulty of capturing the effect of the
West- 46.82 (17) 24.21 (20) 26.18 (16) 1.97 (10)
crisis using pre-crisis data. The table shows the ranking of
Kalimantan
provinces (from low to high) according to the 1999 (BPS99) and
Central- 42.71 (15) 13.50 (10) 15.05 (7) 1.55 (6)
1996 (BPS96) poverty headcount of BPS and the BKKBN Kalimantan
measure. The different welfare measures show different levels
South- 34.03 (8) 8.53 (3) 14.37 (5) 5.84 (16)
of poverty.16 As expected, the expenditure-based poverty head- Kalimantan
count estimates for 1996 are lower than for 1999. Evaluating
East- 32.14 (5) 9.73 (4) 20.16 (13) 10.43 (24)
welfare by the basic needs criteria of the BKKBN yields a higher Kalimantan
count of deprived households. In itself this is not surprising.
North-Sulawesi 39.90 (11) 17.94 (15) 18.19 (9) 0.25 (1)
What is important is that the ranking is different. The ranking
Central- 56.84 (20) 22.30 (19) 28.68 (19) 6.38 (17)
following the BKKBN measure differs from both the levels and
Sulawesi
changes of poverty as measured by BPS. This is also reflected by
South-Sulawesi 41.53 (13) 16.71 (13) 18.32 (10) 1.61 (8)
rank correlation coefficients between the rankings under
different measures. The Spearmans rank correlation coefficient South-East- 64.09 (24) 29.23 (22) 29.51 (22) 0.28 (2)
Sulawesi
between the BKKBN and the BPS district indices is positive and
significant, but well below 1 (0.67 and 0.64 for BPS 1996 and Maluku 60.21 (21) 44.56 (26) 46.14 (24) 1.58 (7)
1999, respectively); while there is no correlation between the Irian-Jaya 70.40 (25) 42.28 (25) 54.75 (26) 12.47 (26)
districts ranking of the BKKBN and the change in the BPS Indonesia 41.98 17.70 23.43 5.73
headcount (0.09).
The differences between the welfare measures are further
illustrated by a graphical exposition. Figure 2 and Figure 3 plot
the BKKBN targeting rule against the poverty BPS estimates, variation around the trend line. This indicates a fuzzy relation-
at the district level. The BKKBN prosperity score is strongly ship between the BKKBN targeting criteria and expenditure-
positively correlated with the 1999 poverty headcount, but with based poverty measured by BPS in 1999. Another reason is that
a lot of variation around the trend. There is a weak positive at the time of the Susenas survey the programme was still
correlation between the change in poverty and the BKKBN expanding in some districts and speed of implementation could
measure for the main body of districts and a greater variation differ between districts. But if it does, then these irregularities
around the mean. The trend line is pulled up by a small are greater in relatively poor districts.
number of districts that experienced a large increase in poverty.
Actual allocation of health cards is less correlated with
expenditure-based poverty than the BKKBN criteria are. There Local targeting and health card utilization
seems to be little correlation between BPS poverty and the What are the key factors that determine local targeting within
allocation of health cards reported in the Susenas data districts? Table 4 reports probit marginal effects of the
(Figure 4). Although the correlation is positive and statistically determinants for health card allocation as well as utilization
significant, the slope is flat. This is in part due to under- conditional on ownership, at household level. The standard
coverage, as for the majority of districts the coverage rate lies errors have been adjusted for the stratified sampling design of
well below the BPS poverty rate. But there is also a large the Susenas survey.
 TARGETING THE POOR IN TIMES OF CRISIS 195

Lowess smoother, bandwidth = 0.8 Table 4 Within-district targeting of JPS health cards to households,
0.9655 and determinants of utilization for outpatient treatment (probit
marginal effects)

(1) (2)
Health card Health card
allocation utilization
BKKBN headcount

Unit of analysis Household Individual

Female 0.0172
[0.0017]**
Age 0.0021
[0.0002]**
Age squared 0.00004
[0.000002]**
0
Female head of household 0.0197 0.0020
0.0109 0.8009
[0.0029]** [0.0045]
BPS poverty rate 1999
Education of head of household (reference none / primary not
Figure 2 Correlation between BKKBN headcount December 1997 and completed)
BPS 1999 poverty rate for districts (locally weighted regression with 0.8 Primary 0.0075 0.0078
bandwidth)
[0.0019]** [0.0034]*
Junior secondary 0.0241 0.0002
[0.0023]** [0.0056]
Lowess smoother, bandwidth = 0.8 Senior secondary 0.0407 0.0077
0.9655 [0.0023]** [0.0079]
Higher 0.0474 0.0031
[0.0035]** [0.0148]
Head of household unemployed 0.0152 0.0055
BKKBN headcount

[0.0086] [0.0112]
Member of household ill last month 0.0119 0.0821
[0.0019]** [0.0040]**
Log household size 0.0082 0.0424
[0.0022]** [0.0047]**
Household composition (reference share of males age 1860)
Share of males age <6 0.0313 0.0397
0
[0.0074]** [0.0141]**
0.0494 0.2759
Share of females age <6 0.0269 0.0282
Change BPS 19961999
[0.0078]** [0.0145]
Figure 3 Correlation between BKKBN headcount December 1997 and Share of males age 612 0.0014 0.0401
crisis impact on BPS poverty rate for districts (locally weighted
regression with 0.8 bandwidth) [0.0063] [0.0122]**
Share of females age 612 0.0116 0.0213
[0.0065] [0.0124]
Share of males age 1317 0.0119 0.0020
Lowess smoother, bandwidth = 0.8 [0.0069] [0.0143]
0.517606 Share of females age 1317 0.0062 0.0115
[0.0071] [0.0156]
Share of females age 1860 0.0018 0.0044
[0.0057] [0.0130]
Health card coverage

Share of males age >60 0.0150 0.0120

[0.0059]* [0.0125]
Share of females age >60 0.0102 0.0362
[0.0059] [0.0139]**
Agriculture main source of income 0.0090 0.0056
[0.0021]** [0.0034]
Per capita expenditure quintile (reference quintile 1, poorest)
0
Quintile 2 0.0150 0.0009
0.0109 0.8009
[0.0024]** [0.0043]
BPS poverty rate 1999
Quintile 3 0.0255 0.0028
Figure 4 Correlation between health card coverage and BPS 1999 [0.0026]** [0.0050]
poverty rate for districts (locally weighted regression with 0.8
bandwidth) (continued)
196 HEALTH POLICY AND PLANNING

Table 4 Continued There are significant negative effects of per capita expendi-
(1) (2) ture on the probability of receiving a health card, confirming
Health card Health card the pro-poor targeting found in the benefit incidence analysis.
allocation utilization For the use of the health card conditional upon owning one,
Quintile 4 0.0418 0.0058 the results do not reflect the slightly non-poor pattern found in
[0.0027]** [0.0066] the benefit incidence. It could be that observed utilization
Quintile 5, richest 0.0657 0.0112 differences between quintiles are too small to yield statistically
[0.0029]** [0.0092] significant marginal effects in the multivariate analysis.
BKKBN criteria Alternatively, it could be that the non-poor trend in utilization
Can worship according to faith 0.0191 0.0140 is not a direct wealth effect but follows from other background
[0.0041]** [0.0045]** characteristics, which are correlated with wealth.
Eat basic food twice a day 0.0059 0.0108 Sector of employment affects both allocation and utilization.
[0.0079] [0.0086] The probability of receiving a health card is lower for
Different clothing school/work/leisure 0.0023 0.0215 households for whom agriculture is the main source of
[0.0052] [0.0083]** income, while they are also less likely to use it for outpatient
Floor made of material other than earth 0.0548 0.0123 care. This may indicate that the opportunity costs of time spent
[0.0033]** [0.0062]* at the health clinic or travelling are relatively higher for farm
Access to modern medical care 0.0291 0.0337 households.
[0.0025]** [0.0039]** Supply and access of health care at village level play an
Living conditions
important role in the targeting process. The number of auxiliary
House made of bamboo 0.0419 0.0031
public clinics negatively affects the probability of receiving
a health card. But, conditional on ownership, the presence of
[0.0036]** [0.0052]
primary and auxiliary public clinics in a village strongly
Access to clean drinking water 0.0077 0.0106
increases the use of health cards for outpatient care. Further,
[0.0029]** [0.0053]*
utilization of health cards is higher in villages where the village
Closed sewer 0.0229 0.0024
leader views health care facilities to be easy or very easy to
[0.0025]** [0.0047]
reach. Overall, the results suggest that, while remote and less
Access to electricity 0.0183 0.0149
wealthy areas with little access to health care receive priority in
[0.0029]** [0.0056]**
the targeting process, the direct and indirect costs of using the
Village characteristics cards are relatively high. On the other hand, the probability of
Rural area 0.0154 0.0084 selection increases as the number of midwives living in the
[0.0039]** [0.0061] village increases. In addition, there is also a positive correlation
IDT village 0.0061 0.0083 with utilization. Since it is the medical staff of local clinics that
[0.0035] [0.0046] actually distribute the health cards to households, this might
No. of primary health clinics 0.0058 0.0111 reflect the importance of informal contacts within the village
[0.0031] [0.0049]* for awareness of, and participation in, social programmes.
No. of auxiliary health clinics 0.0093 0.0159 The probit results confirm that health cards have been
[0.0026]** [0.0039]** awarded to households based on health status. The official
No. of doctors per 1000 inhabitants 0.0067 0.0060 allocation rules require health cards to be distributed to the
[0.0045] [0.0054] poor, irrespective of their health status. But the clearly positive
No. of midwives per 1000 inhabitants 0.0066 0.0225 effect on the variable measuring whether any household
[0.0037] [0.0071]** member has had its daily activities disrupted through illness
Health facilities easy to reach 0.0080 0.0139 indicates that often health cards were given based on acute
[0.0062] [0.0070]* need. For those who fall ill and do not own a health card, it is
Majority of inter-village traffic by land 0.0212 0.0053 still possible to get a health card after seeking medical care
[0.0070]** [0.0116]
(Soelaksono et al. 1999).
Women tend to use the cards more for outpatient care than
BKKBN poverty rate in sub-district 0.0982
men do. The outpatient utilization variable does not reflect the
[0.0075]**
use of health cards for contraception and family planning
BKKBN poverty rate in district 0.0178
services. Nevertheless, it could be that the availability of these
[0.0098]
services under the health card has raised awareness of its
BPS poverty rate 1999 0.0008 0.0007
usefulness amongst women.
[0.0001]** [0.0002]**
The results confirm that the BKKBN prosperity status
 0.0070
variables have influenced health card allocation. An increase
[0.0166] in the district and sub-district BKKBN basic needs measure
Observations 185 608 76 684 increases the probability of receiving a health card. But in
Pseudo R-squared 0.10 0.09 contrast to the other individual BKKBN criteria, having access
Robust standard errors in brackets. to modern care does not yield the expected effect, as it
significant at 10%; *significant at 5%; **significant at 1%. increases both the chance of receiving a health card and,
 TARGETING THE POOR IN TIMES OF CRISIS 197

Table 5 Health card allocation and outpatient utilization simulations under different geographic targeting regimes (percentage shares)

Health card allocation Health card outpatient utilization

(% share of total programme) (% share of total utilization)
Targeting regime Current BPS BKKBN Uniform Current BPS BKKBN Uniform
Quintile 1 (poorest) 34.21 36.90 33.43 28.84 33.43 37.11 33.94 28.11
Quintile 2 25.71 24.95 24.98 23.87 25.81 25.07 25.14 23.45
Quintile 3 19.76 18.91 19.50 20.51 19.94 17.97 18.45 20.61
Quintile 4 13.38 13.07 14.39 16.38 13.96 13.23 14.80 16.88
Quintile 5 (richest) 6.93 6.17 7.70 10.4 6.85 6.63 7.67 10.94
Urban 27.06 25.41 26.01 36.41 25.74 23.33 23.26 35.56
Rural 72.94 74.59 73.99 63.59 74.26 76.67 76.74 64.44
All 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

conditional on ownership, the probability of using it. This
suggests the presence of two countervailing effects: accessibility
to public providers increases exposure to the programme, out-
weighing the official selection rule that areas with little access
should be targeted.
Simulation results
The counterfactual outcomes needed for the decompositions are
presented in Table 5. The first three outcomes refer to specific
geographic targeting regimes, D(G, L) in equation (3): the
actual outcome for the sample used in the multivariate analysis
and two simulated outcomes for geographic targeting following
BPS and BKKBN indicators. The fourth outcome refers to
D(G0, L): uniform geographic targeting combined with observed
local targeting. That is, purposive targeting occurs only within
districts. The counterfactual D(G0, L0) is not shown as it is
simply an equal share of health cards for each quintile.
The table shows concentration of health cards and utilization,
to make the performance of different targeting regimes
comparable.17
Not surprisingly, the actual outcome for the sample corre-
sponds quite closely to a geographical targeting regime that
would follow the BKKBN rule strictly. However, the BPS
indicator would increase allocation to the poor compared with
the actual regime, as this would redistribute 2.7% of the health
cards to the poorest quintile. This may seem a small change,
but in terms of population it reflects roughly 600 000 people in
the poorest quintile that would move into the programme due
to improved geographic targeting.
Relative to uniform geographic targeting, the effect of the
actual geographic targeting regime [D(G, L)- D(G0, L)] is an
increase in the share of the poorest quintile by 5.4 percentage
points, from 28.8 to 34.2%. Considering that complete random
targeting at all levels would yield a concentration of 20% per
quintile, local targeting alone [D(G0, L)- D(G0, L0)] increases
health card concentration with the poorest by 8.8 percentage
points. Hence, for the poorest quintile the overall gain from
decentralized targeting [D(G, L)- D(G0, L0)] is an additional
14.2% share of the health card programme, 37.8% (5.4/14.2) of
which is due to geographic targeting and 62.2% (8.8/14.2) to
local targeting. The BPS targeting rule would increase this even
further to a 16.9% share, of which 47.7% (8.1/16.9) would be
due to geographic targeting.
The simulations for health card utilization show very similar
patterns, indicating that improved targeting of health cards
leads to a proportional improvement in targeting of the benefits
from the health card.
The results from the simulation exercise suggest that there is
indeed scope for geographic targeting. Under the BPS targeting
rule almost half of the gain from targeting would be due to
geographic targeting. However, the results also show the limits
to geographic targeting. Health card concentration with the
poorest quintile under the best performing scenario is still only
36.9%, while perfect targeting to the poorest quintile would
imply 100% concentration. The results do not change much if
we take a broader target group that includes the second
quintile. The poorest 40% of the population would receive a
61.9% share with the BPS geographic targeting regime
accounting for 41.8% (9.1 percentage points) of the deviation
from random targeting. Thus, the difference with perfect
targeting would need to be bridged by local targeting, as
most barriers to access seem to be locally determined and little
affected by geographic targeting.
Conclusion
There is clear evidence that the JPS health card programme was
pro-poor in the sense that the poor had a higher probability of
receiving a health card and using it to obtain free health services.
However, despite pro-poor targeting, a considerable number of
health cards went to households in the richer quintiles.
The programme was implemented at remarkable speed: by
February 1999 approximately 22 million people (10.6% of
Indonesians) lived in households that received a health card.
The decentralized programme design may well have facilitated
this swift reaction, by relying on existing administrative and
operational infrastructure within the districts. However, at such
short notice there were no reliable data on the impact of the
crisis across districts. Geographic targeting criteria were there-
fore based on poverty estimates that reflect the actual level of
poverty to some extent but do not fully capture the income
shocks of the crisis. There appears to be no correlation between
the initial level of poverty and the impact of the crisis.
A notable finding is that some health card owners did not use
their health card when obtaining care from public service
providers. The particular design resulted in a discrepancy
198 HEALTH POLICY AND PLANNING
between health card ownership and utilization. Moreover,
utilization of subsidized services is less pro-poor than owner-
ship. Conditional on ownership, the middle quintiles have a
higher propensity to use their health card, suggesting that
access barriers to health care are not fully overcome by a user
fee waiver. The main deterrent seems to be the opportunity
costs of seeking health care. The direct and indirect costs of
using the health card are relatively higher in the more remote
and rural villages with little access to public health care
providers. While remote areas were targeted because of the lack
of access to health care facilities, it is for the same reason that
usage rates are low.
Micro-simulations show that geographic targeting can con-
tribute considerably to improving targeting performance.
Nevertheless, potential gains in targeting performance through
higher accuracy of geographic poverty indicators are modest.
Most of the targeting gains are to be made within the districts,
with the district allocation committees and public health care
providers. In addition, the simulation exercise shows that
improved targeting of price subsidies does not automatically
imply improved access to public services for the poor, as the gap
between ownership and utilization remains largely unaffected
by health card targeting mechanisms. The results of the
multivariate analysis would suggest that price subsidies need
to be complemented by other interventions that reduce indirect
costs and other barriers to utilization of public health care, such
as reduction in transport costs or supply side impulses.
In terms of policy implications for targeting of future safety
nets and crisis responses, the need for adequate information
systems is apparent from this study. While the decentralized
design of the programme seems flexible in a crisis situation,
up-to-date information and early signalling of crisis effects are
crucial. In addition, further research would need to investigate
how local information can best be exploited under decentralized
targeting in signalling crisis-related poverty dynamics and local
barriers to access.
Acknowledgements
I thank Menno Pradhan, Jan Willem Gunning, Marleen Dekker,
Sudarno Sumarto and two anonymous referees for helpful
comments. A large part of this work was done while I was at
the Vrije Universiteit and Tinbergen Institute in Amsterdam,
The Netherlands. Support from the Netherlands Foundation for
the Advancement of Tropical Research (NWO/WOTRO) is
gratefully acknowledged. All remaining errors are my own.
Endnotes
1
See, for example, Alderman (2001, 2002). Conning and Kevane (2002)
provide an extensive review of community-based targeting.
2
For an account of the economic crisis in Indonesia see, amongst others,
Cameron (1999), Smith et al. (2002) and Frankenberg et al. (2003).
3
Modern health care is here defined as public health care providers
hospitals, health clinics (Puskesmas), village maternity posts
(Polindes) and integrated health posts (Posyandu)and private
providershospitals, doctors, clinics and paramedical services.
Traditional health care is not included.
4
The JPS further included education, food security, labour creation and
micro-credit programmes. Ananta and Siregar (1999) and Daly and
Fane (2002) provide a good overview of all the JPS programmes.
5
The main criticism in this respect is that the BKKBN measure is
based on fixed assets (type of floor and owning clothes) and non-
economic questions regarding religious practices. Sumarto et al.
(2003) further question to interregional consistency of the BKKBN
measure as the village staff who collect the BKKBN data receive
relatively little training, and the figures are vulnerable to
manipulation by local government officials. Using data from a
longitudinal survey in 100 villages, Suryahadi et al. (1999) show
that there is a high degree of mismatch between the BKKBN
classification and expenditure-based poverty measures. For exam-
ple, the BKKBN data classify 49% of the households in the sample
as poor. But according to per capita consumption, only 57% of
these households rank with the poorest 49% of the population.
6
See, for example, Conning and Kevane (2002) or Coady et al. (2004).
7
An alternative specification would be to include the observed health
card coverage in districts. However, this variable would be
endogenous to the outcome variable.
8
Since the utilization probit (2) is estimated for individuals, so is the
first stage allocation probit that is used for computing the selection
term. The variables are the same as those included in the
household level analysis in (1) and the estimation results are
very similar. Joint estimation of the two equations, by means of
Heckman probit, yields identical results, showing no correlation
between the error terms. The results are reported in the
supplementary appendix, which is available upon request.
9
Nevertheless, there may be reasons why the BKKBN indicators could
still be correlated with utilization. The BKKBN indicators determined
the amount of JPS financial compensation to health facilities, and
thus health care quality and supply. Moreover, they might be
correlated with local level of welfare (or deprivation), and thus with
health care demand. I therefore estimated equation (2) with the
BKKBN variables (without ). Their marginal effects were small and
statistically non-significant. Although this does not constitute a
formal test, it is a strong indication that the exclusion restriction is
justified. The results are available upon request.
10
The errors are computed as "~ 1 u  H  L L where
H and L are the upper and lower truncation points, respectively, T
reflects the standard normal cdf and u is drawn from a uniform
distribution with a value between 0 and 1.
11
Household expenditures are adjusted to account for regional price
differences. Further details on construction of the household
expenditure variable are available upon request.
12
The 13 districts in the province of East Timor are excluded from the
analysis due to incomplete data for the JPS module.
13
IDT refers to the Inpres Desa Tertinggal programme, an anti-poverty
programme for economically less developed villages. For this
programme, each village or urban precinct in Indonesia has been
classified as either developed or less developed.
14
The Podes survey asks village leaders whether the closest public
health clinics are (i) very easy, (ii) easy, (iii) difficult or (iv) very
difficult to reach by the majority of the village population.
15
See BPS (2000) for details.
16
Note that the district is the administrative unit for geographic
targeting. Nevertheless, for ease of presentation, the table reports
poverty measures for 26 provinces. In the remainder of the paper
the unit of analysis for geographic targeting is the district.
17
Some observations were lost due to a few missing values in the
covariates, and merging the Susenas and Podes data. The
simulated programme sizes therefore differ slightly from the
actual observed size. Overall incidence varies between 10.7 and
10.9%, slightly above the observed 10.6% reported in Table 2.
Comparing coverage results could then be misleading if changes
for quintiles are due to change in programme size instead of
redistribution. With the concentration measures, the overall size of
the programme is normalized to 100% for all counterfactual
regimes. The coverage results are not reported here but are
available upon request.
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