ASX healthcare shares finished in the green on Thursday, with the S&P/ASX 200 Health Care Index (ASX: XHJ) up 0.36%.
One of the biggest things happening in the healthcare sector today is the Federal Government's proposed new Aged Care Act, which has bipartisan support from the Coalition.
The Act responds to the recommendations made by the Aged Care Taskforce to improve aged care accommodation and services in Australia.
The proposed changes have implications for aged care operators such as Regis Healthcare Ltd (ASX: REG). They may also provide tailwinds for real estate investment trusts (REITs) that own aged care villages, such as Healthco Healthcare and Wellness REIT (ASX: HCW).
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What's in the new Aged Care Act?
The $5.6 billion reform package will require more Australians to make larger means-tested contributions when they enter aged care accommodation or request at-home aged care services.
There will also be a higher maximum room price, which will be indexed over time.
Operators will also be able to retain a small portion of refundable accommodation deposits.
The package also includes $4.3 billion for a program called Support at Home.
This program will begin on 1 July 2025. It aims to help people stay in their homes longer as they get older.
It incorporates three types of services. They are clinical care services (e.g. nursing care), independence services (e.g. help with showering), and everyday living help (e.g. cleaning and shopping).
The Government anticipates this will help 1.4 million Australians stay at home as they age between now and 2035.
In a statement, Aged Care Minister Anika Wells said the aged care sector needed $56 billion in funding by 2050.
The funding is needed to upgrade existing aged care rooms and build more rooms. Australia has an aging population, so demand is expected to rise.
According to the statement:
In the next 40 years, the number of Australians aged over 65 is expected to more than double, with those aged over 85 to more than triple.
Current funding arrangements are not sufficient: in 2022-23, 46 per cent of providers made a loss from accommodation.
A range of reforms will help ensure residential aged care providers can attract the investment they need to keep current facilities open, improve quality, and build new facilities.
ASX healthcare share rose 21% last month
In a recent update, Blackwattle Small Cap Quality Fund portfolio managers Robert Hawkesford and Daniel Broeren said Regis Healthcare shares shot 21% higher last month after the new Act was announced.
Hawkesford and Broeren said:
While the challenge of providing care for an aging population has been long known, past governments have kicked the can down the road for the next government to deal with.
But with the first baby boomers now moving into care, the consequence of insufficient investment is upon us.
The new Aged Care Bill increases the funding of aged care operators to encourage the buildout of more beds.
With funding security now in place, we also anticipate a ramp-up in consolidation activity within the sector in coming years as corporate operators mop up what is a highly fragmented industry.
We believe the next decade is likely to be a golden era for aged care operators.
ASX healthcare share on the rise
Regis Healthcare shares hit an all-time high of $6.70 on Monday.
The ASX healthcare share is up 6% over the past month and 64% over the past six months.
Regis Healthcare shares closed at $6.46, down 2.56% yesterday.
