PersonalFinance and Health Today

Upside of Down? Selling Stocks for Tax Losses March 11, 2009

By ELEANOR LAISE
Hidden in the market's hideous performance is a unique opportunity for investors to cut their tax bills for years to come.
Investors who sell beaten-down holdings can use those losses to offset taxable gains and often a portion of their income. Any leftover losses can then be carried over to lighten or even eliminate the capital-gains-tax load in future years. Some investors who suffered massive losses -- say they owned several million dollars worth of Bear Stearns or Lehman Brothers or even General Electric Co. -- may not have to pay capital-gains tax for years to come.
The savings associated with tax-loss harvesting, as the practice is known, are "the only gift we're getting from the market right now," says John Osbon, chief investment officer of wealth-management firm Osbon Capital Management in Boston. "And it goes away as quickly as the market goes up."
For now, of course, there are plenty of losses to go around. Between the market's peak in October 2007 and early this month, the value of stocks owned by households outside tax-advantaged retirement plans fell by $6.9 trillion, according to Boston College's Center for Retirement Research. (Losses in 401(k)s and other tax-advantaged plans typically don't count for tax purposes.)

Though advisers often warn investors not to let tax considerations drive investment decisions, many say this is a rare opportunity to bank significant losses. David Yeske, managing director at financial-planning firm Yeske Buie, typically harvests only enough losses to offset gains and keep clients' asset allocation on track. But late last year, he snapped up 80% or 90% of the available losses, enough to offset taxable gains and have some left over for future years. One reason: He's rebalancing client portfolios more often, which is "one of the most powerful ways to surf this chaos," Mr. Yeske says. And Metamorphosis Money Management, a Denver firm specializing in tax management for money managers, says assets have doubled over the past year in its "Perpetual Harvest" program, which harvests tax losses on a daily basis.
How It Works
Here's how tax-loss harvesting works. Say you paid $50,000 for shares of Citigroup Inc. that are now worth $5,000. You sell the shares, realizing a $45,000 loss, which is your only loss harvested this year. You use some of that loss to offset $10,000 worth of gains on other investments sold this year, leaving a net capital loss of $35,000. You can then subtract $3,000 of that, or $1,500 if you're married filing separately, from your wages and other income on your 2009 tax return. The remaining $32,000 can be carried forward to reduce future years' tax bills. Unused losses can be carried over from year to year as long as you live, but can't be passed on to heirs.
Talk of capital gains may seem odd at a time when U.S. stocks have dropped more than 50% from their 2007 peak. But some investors can still realize gains from selling, for instance, stocks purchased long ago or alternative investments.
Many investors harvest tax losses late in the year when they start fretting about the size of their next tax bill. But given the market's severe losses lately, there's no reason to wait, financial advisers say.
Methodical tax-loss harvesting can significantly boost investors' after-tax returns when the savings are put back into the market. An investor who harvests losses each month over a 25-year period, reinvesting tax savings back into the portfolio, can beat a strictly buy-and-hold investor's returns by about 0.5 percentage point annually after tax, according to a study by First Quadrant LP, an investment management firm in Pasadena, Calif.
One caveat: If you sell an investment for a loss, don't buy a substantially identical investment within 30 days before or after the sale. If you do, you'll violate the so-called wash-sale rule and won't be able to claim the loss to offset gains. If you sell shares of Coca-Cola Co., for example, you should wait 31 days before buying more shares of that stock.
Avoiding Wash Sales
But sitting on the sidelines waiting for the wash-sale period to expire may be dangerous in this market, advisers say. "Traditionally in markets like right now, the rebound comes fast and furious," says Tom Henske, partner at wealth-management firm Lenox Advisors. "You want to be careful about how much time you're spending out of the market." One approach: When you sell a holding at a loss, immediately swap into a similar, but not identical, investment. An investor selling Coca-Cola Co., for example, could buy PepsiCo Inc. the same day without violating the wash-sale rule. Since the rule can get tricky, investors might want to consult a tax adviser.
Before diving headfirst into harvesting, investors should consider the transaction costs, advisers say. These may include commissions to buy and sell stocks and loads on mutual funds. You probably don't want to pay $20 in commissions, for example, to recognize a $2 loss. And if you've banked so many losses that you can't realistically expect to use them during your lifetime, there's no point in incurring further transaction costs harvesting losses, says Kaye Thomas, a tax lawyer and author of "Capital Gains, Minimal Taxes." But generally, "it never does any harm to have a capital-loss carryover, and the more the merrier, because you never know if you will have large capital gains down the line," Mr. Thomas says.
It generally makes sense to realize a loss as long as there are equally good or better investment options to replace the holding you're selling, says Diane Park, a financial adviser and manager of tax planning at Wade Financial Group in Minneapolis. But, she cautions, it's important to remain diversified when harvesting tax losses. "You don't want to sell all your small-cap stocks," she says.
Staying Diversifed
Many advisers say they're now harvesting losses and rebalancing client portfolios in one step. Say you like to keep 30% of your equities in foreign stocks and 70% in the U.S. market. Your foreign holdings may have declined more sharply than your U.S. stocks, throwing your asset allocation out of whack. You can sell some losing U.S. stocks, moving the money overseas and harvesting losses that can be used for years to come.
Today's market also presents an escape route for investors who are highly concentrated in their employer's stock or in shares that have been handed down for generations. If investors have been hesitant to sell any of those shares because they didn't want to face the tax consequences, they can now offset any gains produced by harvesting losses elsewhere in their portfolio. Often, "people would rather have a highly concentrated, risky position than pay a tax," Mr. Henske says. "Here's the perfect opportunity to do what they should have been doing anyway."

posted by MobyGrape @ 7:35 PM 0 comments

CT Scans Gain Favor as Option for Colonoscopy

CT Scans Gain Favor as Option for Colonoscopy
By RHONDA L. RUNDLEOctober 28, 2008; Page D1
(See Corrections & Amplifications item below.)
When Janice Rodefeld turned 50, her doctor began hounding her to get a colonoscopy. But Ms. Rodefeld was afraid to have the test, which involves snaking a thin tube through the large intestine. It wasn't until she recently was offered a noninvasive "virtual colonoscopy" that she relented.
The test, a type of CT scan in which the patient lies on a table that slides in and out of a tunnel of X-ray detectors, revealed several suspicious growths, called polyps, on the inner wall of Ms. Rodefeld's colon. To remove them, she underwent a standard colonoscopy later the same day. Some of the polyps turned out to be pre-cancerous.
"I'm glad I finally went ahead because those can turn into full-blown cancer," says the 58-year-old retiree in Cottage Grove, Wis.
Virtual colonoscopy, formally known as computed tomographic, or CT, colonography, has been available for some time. But more medical centers are gearing up to offer the procedure at a time when new research shows it can be about as effective at finding large polyps as a standard colonoscopy. The cost of the virtual test can run from $500 to $1,500, or less than half the total cost of a standard colonoscopy. But the newer procedure is rarely covered by health insurers for routine cancer screening.
As in Ms. Rodefeld's case, patients who opt for a virtual colonoscopy may not be able to avoid undergoing the standard procedure as well. That's because when large polyps are detected during the virtual test, doctors must perform a standard colonoscopy to remove them.
Radiological Society of North America
A patient having a virtual colonoscopy.VIRTUAL CHECKUP

More medical centers are offering virtual colonoscopy.
• New research shows the test is about as accurate as a standard colonoscopy.
• Radiologists expect more insurers to start covering the virtual procedure for routine cancer screening.
• Patients undergoing a virtual test will still need a standard colonoscopy if suspicious polyps are found.
When smaller polyps are found, doctors aren't in agreement about what to do. All such growths are routinely removed during standard colonoscopy. But CT colonography researchers are still figuring out when it's safe to leave tiny polyps, and how often to repeat the imaging test. The American Cancer Society recommends that a virtual colonoscopy for healthy men and women 50 or older be repeated every five years if no polyps are found. For standard colonoscopy, the group's recommendation for healthy individuals is every 10 years.
Colon cancer is the second leading cause of cancer death in the U.S., with more than 130,000 new cases diagnosed every year. But studies show that roughly half of all Americans 50 and older aren't getting colonoscopies, possibly because the procedure is scary, requires sedation and carries a tiny risk of bowel perforation. Physicians are hopeful that the easier, less invasive virtual colonoscopy will significantly boost screening rates.
"It is one of the most important advances in medicine in the past five to 10 years because colon cancer is so common and so preventable" when polyps are detected early and removed, says Robert Halvorsen Jr., professor of radiology at Virginia Commonwealth University's School of Medicine.
In CT colonography, the X-ray detectors feed data to a computer program that then creates a three-dimensional model of the abdomen and pelvis. The radiologist's view simulates a flight through the colon, giving the procedure its nickname of virtual colonoscopy. Both virtual and standard tests usually require patients to fast the night before and drink foul-tasting laxatives to cleanse the bowel, which makes it easier for doctors to see abnormalities in the colon.
Accuracy Was Questioned
Until recently, virtual colonoscopies' accuracy in detecting polyps has been questioned, partly because results varied widely in tests at different centers. But a large new study conducted at 15 U.S. medical centers by the American College of Radiology Imaging Network, and sponsored by the National Cancer Institute, has convinced more medical professionals of the test's effectiveness. The results, published in the New England Journal of Medicine in September, "provide evidence that CT colonography is approximately as successful as standard colonoscopy in the detection of colonic polyps," says Dr. Halvorsen, one of the study's co-authors. "It is also much easier for patients, does not require the patient to be sedated, miss a full day of work, or have someone to drive them home," he says.
Many physicians expect the new study to help push the Centers for Medicare & Medicaid Services, which oversees the big government insurance programs, to start covering virtual colonoscopies as soon as next year, a move that private insurers are likely to follow. The agency says its coverage review is set for completion in February.
Some medical centers are getting ready for increased demand. Virtual colonoscopies are generally performed on the same equipment used for other CT scans, which most radiology facilities already have. But centers must acquire specialized computer software to perform CT colonography and train radiologists to read the results. The tests also could provide radiology departments in hospitals and clinics with additional new revenue.
Some medical centers also are rearranging work schedules so that when a radiologist is performing a CT colonography, a gastroenterologist is available in case the patient needs polyps removed; the new study found this occurs among 17% of patients. A good colon-screening service should offer same-day polyp removal because patients shouldn't be forced to endure the distasteful laxative preparation a second time, says Richard Obregon, a radiologist at Invision Sally Jobe, a radiology group in the Denver area that is expanding its colon-screening service. Such coordinated scheduling is already practiced with other screenings, such as mammography programs that offer immediate diagnostic tests.
Return Visit
After Ms. Rodefeld completed her virtual colonoscopy last month, she was sent home and told to continue fasting until her results were reviewed. A couple hours later, she received a call telling her that polyps had been found and a standard colonoscopy would be needed to remove them. "I said 'I don't want to drink that stuff again, so I'll do it today. Let's get this over with,'" she recalls.
The CT imaging test, which took just 15 minutes, was at an outpatient facility affiliated with the University of Wisconsin near her home and she was able to drive herself; the 90-minute colonoscopy was at the university hospital in Madison, further away, and her husband drove her. It required sedation and monitoring that aren't available at the outpatient center. By five o'clock, Ms. Rodefeld was finished and sent home.
"Patients really appreciate that one-stop prep," says Perry Pickhardt, a researcher and professor who established the university's program. Wisconsin's largest health insurers have covered virtual colonoscopy since 2004.
Standard colonoscopies are the most common procedure gastroenterologists perform. CT colonography, meanwhile, is performed by radiologists. That has led to some turf tensions between the two fields. But those tensions are now easing, as most professionals conclude that the new imaging test will increase screening rates and save lives.
Some Risks Seen
Robert S. Sandler, a gastroenterologist and professor at the University of North Carolina School of Medicine, says many people will continue to request a standard colonoscopy. That's because they will prefer a "definitive" test that can detect and remove polyps at the same time, he says. Also, virtual colonoscopies expose patients to small doses of radiation. This "isn't a big risk, but it's not zero," especially when the CT colonography is repeated every three to five years, he says.
But virtual colonoscopies all but eliminate the most serious risk of a standard colonoscopy: perforation of the bowel. The risk is small -- between one and two per thousand tests -- but it can cause severe infection and even death.
"I would never have it done again," says Margery Gould, a 69-year-old retired Los Angeles county employee, who nearly died earlier this year after a series of complications following a botched colonoscopy. Would she have a virtual colonoscopy? "Absolutely," she says, "because it's not invasive."
Write to Rhonda L. Rundle at rhonda.rundle@wsj.com

posted by MobyGrape @ 6:07 PM 0 comments

DonorAdvised Fund

Charity

Aristotle, who was no dummy, once complained that it was a real pain to give money away effectively. Jane Miller will testify that times haven't changed much in that regard. Miller, a stay-at-home mom, and her husband, Charles, a professor, inherited an amount in the low six figures last year. The couple, who live outside of Lincoln, Neb., immediately set aside $35,000 for philanthropy, but they were stumped about what to do with it. Their solution: a donor-advised fund. It allowed the Millers to take a tax deduction, invest the money so it continues to grow and make grants whenever they are ready. "I just love everything about it," Jane says.
Donor-advised funds now hold assets of more than $22 billion, up more than 30% since 2005. Offered primarily through community foundations and charities set up by financial firms, they're all the rage with folks who don't have millions to justify a private foundation; the minimum to open a fund is typically only $5,000 to $25,000. And donations don't have to be in cash: Donors can contribute long-term appreciated securities or even real estate, thus saving on capital gains taxes. A beneficiary who gets a gift of stock or property can even dodge taxes entirely by putting the gift directly in one of these funds.
The Millers went with the Vanguard Charitable Endowment Program, in part because its total fees average less than 1% a year. Fees in the industry are typically slightly higher; steer clear if they exceed 2%. Unlike private foundations, which are required by law to give away at least 5% of their assets each year, donor-advised funds are not legally bound to a minimum grant, although many funds require at least one gift every seven years. In November the Millers made their first grant, anonymously, to the family of a man dying from Lou Gehrig's disease.
These funds are part of a larger shift in philanthropy in which donors strive to stay involved and get maximum bang for their buck, says Gene Tempel, executive director of Indiana University's Center on Philanthropy. Challenge grants, in which a donor agrees to make a contribution if the charity can raise an equal amount from other sources, are another popular tactic. Jack Richmond, owner of all 31 Pizza Hut franchises in San Antonio, makes a $100,000 challenge grant each year to a different local charity. In 10 years, only once has the charity come up short — usually, the organization raises $150,000 or more. "It energizes the group and all its volunteers," Richmond says.
Due diligence is a key component of the giving process. Charitable-giving consultant Gail Shapiro recommends meeting with the organization's executives and saying, "Exactly how would you use this money?" The web site givewell.net features in-depth investigations of the effectiveness of certain charities; you can find related data at guidestar.org and charitynavigator.org. One downside to donors' directing their giving to pet projects: It has left many charities unable to keep the lights on and pay the staff. To do the most good with your gift, consider a supplemental donation toward operating expenses. "You would be hailed as a hero if you came in with a gift like that," says Tempel.

posted by MobyGrape @ 7:10 PM 0 comments

529 Plans: Lower Costs, Better Choices

529 Plans: Lower Costs, Better Choices
By JILIAN MINCERSeptember 9, 2007
Improvements to 529 college savings plans and changes in the tax laws have made these state-overseen programs the clear choice for most families saving for higher education.
In recent years, as the assets in 529 accounts have grown, many states have negotiated with investment providers for lower fees and better investment choices. The plans also received a boost from the Pension Protection Act of 2006, which made permanent the federal tax benefits of 529s -- but did not extend some benefits of Coverdell education savings accounts.
At the same time, more families using custodial accounts to save for college are facing higher taxes with a recent expansion of the "kiddie tax."
(See the accompanying story1 for more on Coverdells and custodial accounts.)
Tax-Free Savings
The 529 plans, named for the section of the Internal Revenue Code under which they were created, were first established in the 1990s. They took off in popularity after a 2001 tax law provided that money withdrawn from the plans to pay higher-education expenses would be free of federal income tax. Without last year's pension legislation, that federal tax provision would have expired by 2011.
MORE ON COLLEGE SAVINGS

• Parents looking beyond 529 plans to save for a child's college costs may need a refresher course, amid tax-law changes that may have dented the appeal of custodial and Coverdell accounts. Here's what you need to know2.
• A little cash goes a long way when savers have time -- and a hospitable stock market -- on their side. That's why it's important to start early3.
"The Pension Protection Act eliminated a lot of uncertainty," says Jackie Williams, executive director of the Ohio Tuition Trust Authority and chairwoman of the College Savings Plans Network, an association of state 529 plans.
Families, many of whom were using other savings vehicles, have jumped into the 529 market in the last year.
"We're seeing people put money into 529 accounts rather than [custodial] accounts," says John Heywood, a principal at Vanguard Group, which has 20 529 plans in 19 states.
Reflecting those inflows and also investment gains, assets are likely to reach nearly $112 billion at the end of this year, estimates Financial Research Corp. in Boston -- up from $90.7 billion at the end of last year and $68.4 billion at year-end 2005.
Mutual funds are the primary investment options offered within 529 plans.
During the last few years, states "have taken to heart" earlier criticism of their 529 offerings, says Kerry O'Boyle, an analyst for Chicago investment research firm Morningstar. States have eliminated some of the high-priced plans and replaced more expensive investment providers with lower-cost options.
"Typically what you're seeing is better investments, because of increased pressure from states," says Brian Boswell, an analyst at Financial Research. "The plans have evolved to the point where they're much higher quality than even two or three years ago."
Indicative of a price war, within the last year Fidelity Investments introduced aged-based portfolios in California with annual expenses of just 0.5% of assets a year. The underlying holdings are all index funds. Indexing giant Vanguard Group followed with fee cuts to its Nevada plan, bringing half of the investment choices to that same 0.5% expense level.
Fees Dip Even Lower
In March, OppenheimerFunds became the new program manager in Illinois, introducing even lower fees. That state's Bright Start program, offered directly to investors, has index portfolios with fees ranging from 0.2% to 0.23% and actively managed portfolios ranging from 0.38% to 0.63%.
(Most 529 plans now offer age-based investments, which automatically become more conservatively invested as the child gets older.)
Meanwhile, some states have added or plan to add federally insured bank products to their 529 lineup. For conservative investors, these offer guaranteed returns, but may deliver lower returns over time than stock-market investments. Investments in the Ohio CD program, which is available through Fifth Third Bancorp, more than tripled in the last year to over $66 million. Other states that have or are working on CD options include Virginia and Arizona.
Picking a Plan
Almost every state offers a 529 plan and some offer more than one.
Joe Hurley, founder of Savingforcollege.com, an independent Web site that provides information about 529 plans, says families should first consider their own state's plans. That's because more than 30 states offer tax or other benefits to residents who invest in an in-state plan.
(States including Maine, Kansas and Pennsylvania have begun to pass on those benefits to residents who invest in out-of-state 529 plans.)
Take Time to Compare
Investors should then compare the home-state plan to other offerings. In some cases, they may decide to go with a better performing plan with lower costs from out of state.
That's what Illinois resident Mark Merlet did early this year, before that state's new program was introduced. He compared a number of plans for his two young sons and chose a T. Rowe Price Group plan in Alaska because its performance and fees were better than the plan that was then available in Illinois.
In going with the Alaska plan, Mr. Merlet gave up a substantial deduction on his Illinois return. He says he would consider opening an Illinois account in the future, now that his home state's program has lower fees.
Consumers also need to decide whether they want a direct-sold program or one distributed through brokers, which would typically have higher fees. Many states offer both varieties.
Attention, Grandparents
It's not just parents who are opening up 529 accounts for their kids. Mr. Heywood of Vanguard says grandparents also are using 529 plans, for estate planning and to ensure that money is set aside for grandchildren in a separate account available for college expenses. He says about a quarter to a third of the assets are funded by grandparents.
Some older people are making very large 529 contributions for their grandkids. Under tax rules, you can give up to $12,000 this year to another individual without any federal tax consequences. A couple can together give $24,000 to one recipient.
But under the rules for 529 plans, you can give up to five years' contributions at once -- up to $60,000 per beneficiary or $120,000 per beneficiary from a married couple -- without generating a taxable gift, assuming that no other gift is made to the same person during the five-year period.
Don't Put It Off
Saving for college, even if you start early, is intimidating. "Sometimes families decide there's no way I'll meet that goal so I won't try," says Ms. Williams of the College Savings Plans Network.
Instead, she says, "we're trying to get people to invest and save in a systematic fashion."
There are a number of online sites to help consumers compare 529 plans.
Two of the most popular ones are Savingforcollege.com4 and www.CollegeSavings.org5, which is coordinated by the College Savings Plans Network.
Write to Jilian Mincer at jilian.mincer@dowjones.com6

posted by MobyGrape @ 10:06 AM 0 comments

Ethanol Shifts Share Prices Into Overdrive

Ethanol Shifts Share Prices Into Overdrive

By SCOTT KILMAN
April 13, 2006; Page C1

Wall Street is pumped up about ethanol.

The gasoline substitute emerged as a grass-roots investment movement last year, with farmers raiding their savings to build plants that convert corn into the renewable fuel. Now mutual-fund managers and well-heeled investors are grasping for any stock with the slimmest connection to ethanol.


With soaring gasoline prices, the spot price of ethanol -- an alcohol-based alternative fuel that is blended with gasoline -- has doubled over the past 12 months to about $2.65 a gallon. The Bush administration has been plugging ethanol in recent months, saying it could help break America's crude-oil addiction. Adding to the froth, billionaire Bill Gates has become an ethanol booster.

"It looks like a rush to me," said Elif Acar, a credit analyst at Standard & Poor's, which rates the ethanol industry as "speculative."

"I'm not sure the long-term prospects are being weighed," she said.

U.S. ethanol makers are either small parts of sprawling companies, start-ups or private concerns. So investors are flocking to a few stocks, sending their prices soaring. So, where does an average stock picker get in, since everyone is elbowing for a narrow doorway?

At the top of the heap is Archer-Daniels-Midland. Even though ethanol generates only about 5% of its revenue, shares in the Decatur, Ill., grain-processing titan have climbed about 50% so far this year, swelling its market value to more than $24 billion. In New York Stock Exchange composite trading at 4 p.m. yesterday, ADM's shares were at $37.39, up 84 cents, or 2.3%.

The run-up is largely because it is the biggest and most seasoned ethanol maker in a fledgling and fragmented industry. ADM produced about one billion gallons of fuel ethanol last year, roughly a quarter of the industry's production. It also plans to build a corn-to-ethanol mill in Columbus, Neb., capable of making 275 million gallons annually, eclipsing the capacity of its closest rival.

Hoping to cash in on investor interest, VeraSun Energy, of Brookings, S.D., and Aventine Renewable Energy Holdings, of Pekin, Ill., the second-largest and third-largest ethanol makers, respectively, both filed two weeks ago with the Securities and Exchange Commission to launch initial public offerings of their shares. The fourth-biggest producer is Cargill, the closely held commodity-processing titan in Minneapolis, which has plans to expand rapidly.

Impatient, some investors are snapping up shares of companies that merely have ethanol in their future. The stock of Andersons, a Maumee, Ohio, company with interests in grain, fertilizer and rail cars, began jumping two weeks ago as investors realized that it recently acquired stakes in three ethanol plants that are currently under construction. Since March 27, the market value of Andersons has swelled by about $145 million, or 28%, even though it has invested just $36.1 million in its ethanol holdings.

"Considering how fast the industry is growing, there just aren't that many places for investors to go in ethanol yet," said Neil Koehler, president and chief executive of Pacific Ethanol, an ethanol distributor that posted a net loss of $9.1 million in 2005 on sales of $87.6 million. The stock of the Fresno, Calif., company has nearly tripled since it announced in November that Mr. Gates, chairman of Microsoft, intends to invest $84 million in its plan to build five ethanol plants on the West Coast, giving him a 28% stake.

There are downsides. Ethanol makers, which generate about 3% of U.S. motor fuel, can do little to hedge their risks. They have a hard time passing along any rise in the cost of corn -- their single biggest expense in making the fuel -- because the price of ethanol is largely tied to the price of gasoline, since ethanol is primarily valued for its ability to substitute for the petroleum-based fuel.

That, in turn, is tied to the price of crude oil, which is currently high -- trading at close to $70 a barrel -- but difficult to forecast.

Wall Street, though, is mostly optimistic. For one thing, President Bush signed an energy act in August requiring the oil industry for the first time to use some renewable fuels to make motor fuel. The annual mandate grows to 7.5 billion gallons in 2012 from four billion gallons this year.

The energy measure also gave a sideways boost to ethanol. The measure denied the oil industry liability protection for a gasoline additive called MTBE, which many states are banning because of groundwater-pollution concerns. So oil companies are switching to ethanol, which, like MTBE, raises the amount of oxygen in gasoline so it burns clean enough to satisfy U.S. air-pollution standards. The switch could increase demand for ethanol by roughly two billion gallons annually, beginning this year, say ethanol executives.

By late January, a boom seemed under way to some stock analysts. Archer-Daniels-Midland reported that strong ethanol prices helped profit for the fiscal second quarter ended Dec. 31 rise by 17%, far in excess of Wall Street estimates. ADM also divulged that it has been diverting so much corn from its sweetener business to ethanol production that soft-drink companies had been forced to swallow stiff price increases for high-fructose corn syrup.

ADM has yet to capitalize fully on the recent run-up in ethanol prices. It sells much of its production under six-month-long contracts. Going forward, ADM should be able to lock in higher prices. "ADM has at least two years of growth ahead of it, unless gas prices collapse," said John McMillin, an analyst at Prudential Equity Group in New York. Mr. McMillin has ADM rated as "overweight," meaning he expects the stock to outperform the average of all the stocks he covers. He doesn't own any ADM shares, nor does Prudential Equity Group do any investment banking for ADM.

But the lofty price of ADM shares has some analysts concerned that the stock is attracting energy-oriented investors who might have unrealistic expectations for a company that is still mostly a maker of food ingredients, usually a thin-margin business.

Christine McCracken, an analyst at FTN Midwest Securities, worries that ADM's share price -- which is more than 20 times the average estimate of its per-share earnings for the fiscal year ending in June -- is getting too rich for a commodity processor. Over the past five years, ADM's shares have traded at 12 times its per-share earnings when profits were peaking. What's more, the shares of ADM's peer group are trading at a multiple of 13.5.

"I don't see it," said Ms. McCracken, who doesn't own any ADM shares, which she rates "neutral," essentially meaning hold.

Some economists are wondering whether the ethanol industry is growing so fast that it could be faced with a glut before too long. According to the Renewable Fuels Association, the ethanol trade group, 33 new plants are under construction and nine existing plants are being expanded. At this rate, the industry will have the capacity to make more than what Energy Department economists figure is needed for several years.

For ADM's part, Chief Executive and Chairman G. Allen Andreas figures the ethanol market has the long-term potential to grow to 15 billion gallons annually as the oil industry looks for ways to stretch capacity and the auto industry offers more vehicles that can run on an 85% ethanol blend.

Write to Scott Kilman at scott.kilman@wsj.com

posted by MobyGrape @ 7:54 AM 0 comments

Convert Modest Savings Into Steady Income for Retirement

One Way to Convert Modest Savings Into Steady Income for Retirement
April 5, 2006; Page D1

Americans tend to be an optimistic bunch -- except when it comes to their own longevity. They don't realize how long they might live, how ill-prepared they are for a lengthy retirement and how easy it would be to outlive their savings.

What to do? My contention: Many baby boomers could salvage their retirement dreams by buying immediate-fixed annuities, which would convert their modest savings into a healthy stream of lifetime income. As an added bonus, the recent rise in interest rates has boosted annuity payouts.

Yet income annuities are shunned by retirees, with sales stuck at a modest $5.3 billion in both 2004 and 2005. Indeed, if the emails I receive are any guide, many people think they could generate just as much income on their own. But that's a lot trickier than it seems.

• Running down. To understand what's at stake, imagine a 65-year-old woman with $100,000 to invest, trying to decide between high-quality bonds and an annuity that provides lifetime income. (These income annuities shouldn't be confused with tax-deferred variable annuities, the controversial product that allows folks to save for retirement by investing in a menu of mutual funds.)


If she purchases the annuity, she might get an annual income of $7,336, according to a quote for Vanguard Group's Lifetime Income Program. This quote is for income that's paid as a single annual sum, with the first payment made soon after the annuity's purchase.


The annuity may offer a heap of income, but it's also a nerve-racking investment. If our 65-year-old dies soon after buying, her $100,000 would be gone and she would have received scant income in return. Fearful that might happen, she instead sinks her $100,000 into the Vanguard Long-Term Investment-Grade fund, which was recently yielding 5.7%.

This fund would get hammered if interest rates rose sharply. Still, it is Vanguard's highest-yielding high-quality bond fund. There's also no charge to sell the fund, which is important. The reason: Our 65-year-old will endeavor to replicate the annuity's income by slowly selling off her fund shares.

That might seem like a safe strategy. For instance, in the first year, she would pull out $7,336 for spending money, leaving a fund balance of $92,664. That $92,664 would then grow 5.7% over the next 12 months, so she finishes the first year with $97,946. That's not much below her initial $100,000. In fact, even after 10 years, when she is age 75, her bond fund would still be worth over $73,000. From there, however, things start spiraling down.

The problem: She keeps pulling out $7,336 each year, but the amount of interest she earns keeps shrinking as her fund balance gets smaller and smaller. By age 88, she would be down to some $7,000 -- and unable to afford the next year's full withdrawal.

Today, a 65-year-old woman can expect to live until age 85. In other words, picking the bond fund over the annuity would be a problem if our 65-year-old woman lives more than three years beyond her life expectancy.

The numbers for a 65-year-old man tell a similar story. The annuity would pay $7,927 each year. If he tried to replicate that income by drawing down the Vanguard bond fund, he would run out of money at age 85. That's three years beyond the median life expectancy for a 65-year-old man.

• Living long. What percentage of 65-year-old men and women will live three years beyond their life expectancy? New York insurer MetLife puts the number at 39%. Make no mistake: For today's 65-year-olds, living until their late 80s is a distinct possibility -- and thus an immediate-fixed annuity could be a smart purchase.


These annuities, of course, hold the most appeal if you are in good health and family history suggests you will live a long time. Indeed, in pricing annuities, insurers assume buyers will live longer than average.

But even if you aren't sure you will live to a ripe old age, an annuity could still be a comforting purchase. If you stash maybe 25% of your portfolio in a lifetime-income annuity, that will give you some downside protection, allowing you to invest and spend down your other assets more aggressively. Intrigued? Here are five tips for immediate-fixed annuity buyers.

Get a fistful of quotes from your insurance agent or from a Web site like www.immediateannuities.com. There's often a wide spread in the income offered by insurers, so it pays to shop around.

Many annuity buyers opt for a guarantee, such as promised payments for 10 or 15 years. But I wouldn't bother, unless taking the guarantee involves only a tiny cut in the annuity's income. Instead, to eliminate the risk that you will invest a huge chunk in an annuity and die soon after, consider making smaller annuity purchases each year through the first 10 years of your retirement.

If you buy income annuities over time, that will also give you the chance to reduce risk by buying from different insurers. Even then, stick with top-rated insurers.

To protect against inflation, purchase an annuity where payments are linked to inflation or where your annuity check is stepped up each year by, say, 3%.

If you're married, consider a joint-life annuity, where the income is paid until both of you have died. Because you are insuring two lives, your annuity investment won't be wasted money if one of you dies prematurely. Buying a lifetime income stream could also be a smart move if you're worried about your spouse's ability to manage the household's finances after your death.

posted by MobyGrape @ 7:54 AM 0 comments

Study Challenges Tie of Estrogen Use To Breast Cancer

Study Challenges Tie of Estrogen Use To Breast Cancer

By TARA PARKER-POPE
April 12, 2006; Page A1

For years doctors have warned that using the hormone estrogen during menopause puts a woman at higher risk for breast cancer. Now data on thousands of women suggest that the warning may have been unnecessary.

Investigators in the federally funded Women's Health Initiative found that using estrogen doesn't increase the risk of breast cancer and may even lower it. Estrogen users were 20% less likely to develop breast cancer after an average of seven years taking the drug than women taking a placebo, according to results being reported today in the Journal of the American Medical Association.

The 20% figure isn't statistically significant and by itself doesn't support the use of estrogen to prevent breast cancer. But the study's data do give much-needed reassurance to millions of women who take estrogen to treat menopause symptoms or cope with the effects of a hysterectomy.

The results also raise questions about the safety of another hormone, progestin, which many women take with estrogen. Doctors started adding progestin to the hormone mix in the 1980s to help avert a form of uterine cancer. But the new data, combined with earlier Women's Health Initiative results, suggest that progestin may be the culprit in raising breast-cancer risk.


"The breast-cancer story seems to be different from what we thought,'' says Marcia Stefanick, the Stanford University professor who has led much of the WHI research.

Like many results from the $750 million Women's Health Initiative, the new estrogen data won't escape controversy. The WHI studies have been plagued by design challenges and differing interpretations of the data. In the latest study, more than half of the 10,739 postmenopausal women in the study stopped taking their pills. Most of the women were also overweight, a factor known to influence breast-cancer risk.

The National Institutes of Health stopped the estrogen study earlier than planned, leaving the researchers tantalizingly short of firmer answers about estrogen and breast cancer. As a result, some researchers say it's a mistake to exonerate estrogen just yet.

"This is just one of these flukes because every other bit of information we have tells you that estrogen increases risk of breast cancer in postmenopausal women,'' says Malcolm Pike, a professor of preventive medicine and a longtime hormone researcher at the University of Southern California's Keck School of Medicine. "The notion that says this one study can turn over every other piece of scientific evidence we possess is nonsense."

The WHI, begun in 1991, is the largest randomized clinical trial of women's health and has studied everything from low-fat diets to vitamin D. Unlike earlier large-scale studies, it randomly assigned women to take hormones or a placebo, providing a scientific way to measure the effects of hormones-taking.

Since the 1960s, women have increasingly used hormones to cope with menopause symptoms such as hot flashes, which are triggered by fluctuating levels of a woman's natural estrogen due to aging. The hormones undoubtedly relieve symptoms for many. The question has always been how the drugs influence the risk of health problems -- particularly the two biggest killers, cancer and heart disease.

The first part of the WHI raised alarms on both counts. In that part, researchers studied 16,608 older women, half taking estrogen plus progestin and the other half taking a placebo. The study was stopped early in July 2002 when safety monitoring showed that the hormone users had more heart attacks and breast cancer. Some researchers challenged the data, citing design questions including the predominance of older women in the study. Still, the breast-cancer finding seemed solid because it was in tune with earlier studies.

After the first part of the WHI was stopped, researchers continued a parallel WHI trial, which compared women who took estrogen alone against those taking a placebo. These women all had undergone a hysterectomy, or removal of the uterus. That meant they weren't at risk for cancer of the endometrium, the lining of the uterus. Since the only reason for taking progestin was to prevent endometrial cancer, these women didn't need it.

Many scientists expected that the breast-cancer risk from estrogen alone would resemble the risk from estrogen plus progestin. That view was based on several important studies in the mid- to late 1990s in which researchers tracked the health habits of women over time without dictating any particular treatment. These observational studies linked estrogen use by itself to a higher risk of breast cancer.

Thus the surprise at the new results: Far from raising breast-cancer risk, estrogen seems to offer a slight protective effect. When an initial version of the findings was published in April 2004 in JAMA, many researchers dismissed the data as a statistical anomaly that was likely due to chance.

After WHI investigators subsequently submitted a more-detailed analysis of the breast-cancer data to JAMA, reviewers for the medical journal continued to raise questions. Hormone use changes the way the breast looks in a mammogram and could make it harder to spot tumors. The reviewers wanted to be sure they were really seeing fewer cases of cancer in the estrogen takers and wanted more details about the mammograms and breast biopsies. All the questions delayed publication until today.

"It's a lot harder to publish something that goes contrary to what people believe,'' says Dr. Stefanick.


At this point, the WHI investigators don't believe women should use hormones to prevent breast cancer. Nonetheless, some additional analyses raise the possibility that estrogen may in fact offer protection. Because 54% of women had stopped taking pills by the study's end, investigators decided to also analyze data from just those women who consistently took their medications. Among these women, breast cancer risk was lowered by 33% -- a trend that is considered statistically valid. When investigators looked at specific cancers, estrogen appeared to lower risk for ductal carcinoma -- the most common type of breast cancer -- by 29%.

Why did earlier studies show opposite results? One answer may be that hormone users in earlier studies were more likely to get mammograms, says Rowan Chlebowski, a WHI investigator and breast-cancer researcher at the University of California, Los Angeles. Doctors would have found more cancer in estrogen users simply because they were looking harder.

In fact, one earlier study supports the new results. A little-noticed 2003 study in the Journal of Clinical Oncology looked at the mammograms of nearly 375,000 postmenopausal women. Women who used estrogen for five years or more were 8% less likely to be diagnosed with breast cancer compared with nonusers.

Still, several quirks in the WHI study population are likely to raise debate. Nearly half the women in the estrogen-only study were obese, so it's possible that the results are less applicable to thin women. The reason: Fat is a source of estrogen, and it may be that overweight women have so much natural estrogen from fat that adding more from pills doesn't make much difference.

Also, 41% of the women in the study had both their ovaries removed, a practice that can lower breast-cancer risk. Women in the WHI studies used Premarin, a complex mixture of estrogens derived from horse urine that may work differently than other forms of estrogen on the market.

The WHI study of estrogen-only users was supposed to continue through 2005 but officials at the National Institutes of Health stopped it a year early in February 2004. Although an independent safety monitoring board had narrowly decided that the study could continue, the NIH overruled it, citing a slight increase in stroke risk among the estrogen users.

In hindsight, the early end to the study made it harder to reach conclusions about estrogen and breast-cancer risk. Dr. Chlebowski says it would be "nicer" to have the data from the extra year. "The investigators wanted to keep the study open," he says, but the decision was the NIH's to make.

NIH director Elias Zerhouni says the agency consulted outside experts as well as the safety board and investigators. He says the data about stroke and blood-clot risks had to take precedence over the still-unclear breast-cancer data, which "was really counter to what we know about estrogens."

"We weighed the risk-benefit and decided it was time to protect the patients rather than look at potential positive data on the breast cancer side," says Dr. Zerhouni. "A trial when you're dealing with healthy people has to have a much lower tolerance for complications."

The WHI estrogen results could fuel new avenues of research into the role estrogen plays in breast cancer. Scientists already know that certain breast cancers thrive in the presence of endogenous estrogen -- the kind made by a woman's body. Medications such as tamoxifen or new aromatase inhibitors help stave off breast cancer either by blocking natural estrogen's effects or interfering with production of it. Yet doctors also sometimes use high doses of estrogen to treat breast cancer in certain patients.

How could adding estrogen to a woman's body possibly reduce her risk for breast cancer? Scientists think a woman's natural estrogen may affect breast-cancer risk differently than estrogen taken in the form of pills, patches and creams. However, researchers say the issue needs much more investigation.

The new results are also likely to make doctors take a harder look at progestin. Its use took off in the 1980s, after women were frightened away from estrogen because of reports that it dramatically raised the risk of uterine cancer. To solve the problem, doctors began prescribing progestin, which was known to blunt the effects of estrogen on the uterus, thereby preventing endometrial cancer.

But in trying to prevent one form of cancer, doctors may have inadvertently raised the risk of another. "It was an accepted dogma that estrogen was the bad guy for the breast and endometrium," says Kent Osborne, director of the breast center at the Baylor College of Medicine in Houston. "Now it's turning out that it's progestin that's bad for the breast and estrogen that's bad for the endometrium."

Recently some doctors have tried giving progestin only a few times a year rather than every month. This may be enough to protect the uterine lining from precancerous changes without exposing women's breasts to the long-term effects of progestin.

"I'd like to see a shift in this country away from using so much progestin," says Hugh S. Taylor, an associate professor at Yale University School of Medicine. "Many ob-gyns are thinking this but they are afraid to do it."

Write to Tara Parker-Pope at tara.parker-pope@wsj.com

posted by MobyGrape @ 7:54 AM 0 comments

The Case Against Vitamins 3/20/2006

Prevention
The Case Against Vitamins

Recent studies show that many vitamins not only don't help. They may actually cause harm.
By TARA PARKER-POPE
March 20, 2006; Page R1

Every day, millions of Americans gobble down fistfuls of vitamins in a bid to ward off ill health. They swallow megadoses of vitamin C in hopes of boosting their immune systems, B vitamins to protect their hearts, and vitamin E, beta carotene and other antioxidants to fight cancer.

It's estimated that 70% of American households buy vitamins. Annual spending on vitamins reached $7 billion last year, according to industry figures.

But a troubling body of research is beginning to suggest that vitamin supplements may be doing more harm than good. Over the past several years, studies that were expected to prove dramatic benefits from vitamin use have instead shown the opposite.

THE JOURNAL REPORT



See the complete Personal Health report.Beta carotene was seen as a cancer fighter, but it appeared to promote lung cancer in a study of former smokers. Too much vitamin A, sometimes taken to boost the immune system, can increase a woman's risk for hip fracture. A study of whether vitamin E improved heart health showed higher rates of congestive heart failure among vitamin users.

And there are growing concerns that antioxidants, long viewed as cancer fighters, may actually promote some cancer and interfere with treatments.

Last summer, the prestigious Medical Letter, a nonprofit group that studies the evidence and develops consensus statements to advise doctors about important medical issues, issued a critical report on a number of different vitamins, stressing the apparent risks that have emerged from recent studies. The Food and Nutrition Board of the National Academy of Sciences -- the top U.S. authority for nutritional recommendations -- has concluded that taking antioxidant supplements serves no purpose.

BEYOND VITAMINS



PODCAST: If vitamins may be doing more harm than good, what about other dietary supplements? The Journal's Tara Parker-Pope examines some recent studies that suggest supplements don't really work, and explains why the reality may be more complicated than that."People hear that if they take vitamins they'll feel better," says Edgar R. Miller, clinical investigator for the National Institute on Aging and author of an analysis that showed a higher risk of death among vitamin E users in several studies. "But when you put [vitamins] to the test in clinical trials, the results are hugely disappointing and in some cases show harm. People think they are going to live longer, but the evidence doesn't support that. Sometimes it's actually the opposite."

Not everybody is buying these results. Consumers remain devoted to their vitamin regimens. Industry groups such as the Council for Responsible Nutrition reject the recent evidence, saying the research is flawed or the people studied were too sick to start with, making it impossible to draw any broad conclusions for the rest of us. "I don't think it's black and white," says Andrew Shao, vice president of regulatory and scientific affairs for the council. "It's important to know that a lot of these studies have been done in diseased populations. I suppose the expectations are too high. These vitamins are not drugs. They can't be expected to cure or reverse 20, 30 or 40 years of disease."

Everyone needs vitamins, which are key nutrients the body can't make. But micronutrients from foods usually are adequate to prevent vitamin deficiency, which is rare in the U.S. Even so, vitamin B-12 supplements for the elderly and folic acid for women of child-bearing age are recommended.

But the proven benefits of a few supplements pale next to the growing concerns about widespread vitamin use. Nobody knows why high doses of vitamins taken as pills might cause harm. One theory has to do with free radicals, a common byproduct of the normal chemical reactions that occur in cells. Every day cells get damaged due to a variety of factors including sunlight, the foods we eat and natural aging. This creates free radicals, highly reactive molecules that can damage tissues and lead to cancer and heart disease. Although the body has several ways of coping with free radicals, many people believe high doses of vitamins help, mopping up free radicals before they can do much damage.


But the problem is that free radicals may serve an important purpose, sending a powerful signal to the body's immune system, which enlists its own army of soldiers to fight the free radicals and fix the damage. The theory is that by taking vitamins, we undermine that message system and upset the balance of antioxidants and free radicals in the body. It may be that vitamins clean up the free-radical mess, but the immune system isn't alerted to fix the damage, allowing disease to set in.

Another concern is that while vitamins from food sources are necessary and good for you, consumers today often scarf down vitamins at levels that are more like a pharmaceutical dose than something found in nature. In a test tube, high doses of a single antioxidant can turn bad, evolving into pro-oxidants -- meaning they start to oxidize and create free radicals, causing the very problem you were trying to prevent.

Here's a look at what science shows about the risks and benefits of some particular vitamins.

VITAMIN E

Vitamin E has long been touted as beneficial to heart health, based in part on observational studies that have shown diets rich in fruits and vegetables containing E and other vitamins are associated with a decreased risk of coronary disease. Vitamin E also has been studied as a way to help Alzheimer's disease and to prevent prostate cancer.

But research into vitamin E supplements has been disappointing. Most clinical trials in recent years have been inconclusive or shown no benefit -- and some have suggested harm. The University of California-Berkeley Wellness Letter, from the same institution that discovered the vitamin in 1922, last year said it no longer recommended vitamin E supplements because of the data showing no benefits.

Last year, Johns Hopkins University researchers in Baltimore published a shocking finding. After reviewing the data from 19 vitamin E clinical trials of more than 135,000 people, the analysis showed high doses of vitamin E (greater than 400 IUs) increased a person's risk for dying during the study period by 4%. Taking the vitamin E with other vitamins and minerals resulted in a 6% higher risk of dying.

Not everyone agrees with the methods used in the study. And most of the patients were already unhealthy, so the results may not apply to healthy people.

Since the analysis was published, another study of about 9,500 patients evaluated long-term use of 400 IUs of vitamin E daily. The study didn't show any statistically meaningful differences between vitamin users in terms of cancer, heart attacks or stroke, but the vitamin E takers had a 13% higher risk for heart failure.

The risk of taking vitamin E for cancer is also of concern. Last year, the Journal of Clinical Oncology published a study of 540 patients with head and neck cancer who were being treated with radiation therapy. The patients took 400 IUs of vitamin E or a placebo. The supplement reduced side effects by nearly 30%. But recurrence rates among the vitamin E users were 37% higher. The finding was not statistically meaningful, but has raised concerns that vitamin intake could hinder the effectiveness of treatments.

Not all the vitamin E news has been bad. Last year, the Women's Health Study evaluated use of 600 IUs of vitamin E every other day by nearly 40,000 healthy women. Overall, there was no benefit of using vitamin E for major cardiovascular events or cancer. But a subgroup analysis found there was a 24% lower risk for cardiovascular deaths and a 26% reduction in major cardiovascular events among women over 65. The researchers said those findings weren't conclusive, however, in part because they contradict other clinical-trial evidence.

Another study, called Select, is looking at whether vitamin E and selenium lower risk for prostate cancer. The study won't finish for several years, but this summer a safety monitoring committee will review the results to date to see whether any significant risks or benefits have emerged. In February, another study reported in the Journal of the National Cancer Institute showed no clear benefit of vitamin E on prostate-cancer risk, although there was benefit among a subgroup of smokers.

The Select trial already offers a cautionary tale on vitamin use, says Eric Klein, head of urologic oncology at the Cleveland Clinic and a Select investigator. Select was started after a study of smokers in Finland looked at beta carotene and vitamin E to prevent lung cancer. While vitamin E users had an unexpected lower risk for prostate cancer, the beta carotene users had a higher risk for lung cancer. "The psyche of the U.S. population is that a nutraceutical can't be harmful and might be helpful, so why not take it?" says Dr. Klein. "That thinking is just not correct. The message is: Be careful until the data is in."

BETA CAROTENE AND VITAMIN A

Vitamin A is a family of compounds that play a role in vision, bone health, cell division and the regulation of the immune system. Retinol is one of the most usable forms of vitamin A. Several carotenoids, the darkly colored pigments found in many plant foods, can be converted to vitamin A, but beta carotene is the carotenoid that is most efficiently converted to vitamin A.

Although studies have suggested an association between diets rich in beta carotene and vitamin A and a lower risk for many types of cancer, the supplements taken in pill form have proved risky.

The 1994 Finland study of smokers taking 20 milligrams a day of beta carotene showed an 18% higher incidence of lung cancer among beta carotene users. In 1996, a study called Caret looked at beta carotene and vitamin A use among smokers and workers exposed to asbestos. The trial was stopped when the participants taking the combined therapy showed a 28% higher risk for lung cancer and a 26% higher risk of dying from heart disease.

More recently, a 2002 Harvard study of more than 72,000 nurses showed that those who consumed high levels of vitamin A from foods, multivitamins and supplements had a 48% higher risk for hip fracture than nurses who had the lowest intake of vitamin A. Notably, nurses who ate a lot of foods high in vitamin A also had higher risk, possibly indicating that too many foods are now fortified with the vitamin. Milk, margarine and breakfast cereals are fortified with vitamin A. High intake of vitamin A has also been associated with a higher risk of birth defects.

VITAMIN C

Ever since Nobel laureate Linus Pauling extolled the virtues of vitamin C more than 30 years ago, Americans have been taking handfuls of the pills, convinced the vitamins do everything from preventing colds to fighting cancer. But like other vitamin studies, research into vitamin C has been disappointing.

Last summer, the Cochrane Database of Systematic Reviews looked at the clinical-trial evidence for vitamin C supplements in treating the common cold. Among 23 studies, there was no overall benefit to using vitamin C to prevent colds. However, six studies of marathon runners, skiers and soldiers exposed to significant cold or physical stress showed about a 50% reduction in colds with vitamin C use. But the investigators warned that these were extreme circumstances and probably don't apply to the general population. Vitamin C may slightly shorten the duration of colds, but the investigators said the small difference may not even be noticed by patients.

There are also concerns about risks associated with vitamin C. A 1999 analysis in the British Medical Journal showed that in three studies, vitamin C didn't lower death rates among elderly people, and may actually have increased the risk of dying slightly. Last year, the cancer journal CA reported that antioxidant supplements, including vitamin C, should be avoided by patients being treated for cancer. Scientists have found that cancer cells gobble up vitamin C faster than normal cells, suggesting that any protection vitamin C gives might be even greater for tumors than normal cells. In 2001 scientists showed that cancer cells may become resistant to chemotherapy drugs after treatment with vitamin C. "It's a mistake to think that cancer cells...don't like nutrients," says Gabriella D'Andrea, oncologist with Memorial Sloan-Kettering Cancer Center in New York and author of the review.

Whether any of the antioxidant vitamins are cancer fighters or cancer promoters remains an open question. Although some data suggest a benefit, others suggest harm. In October 2004 Copenhagen researchers reviewed seven randomized trials of beta carotene, selenium, and vitamins A, C and E (alone or in combination) in esophageal, gastric, colorectal, pancreatic and liver cancer. The antioxidant users had a 6% higher death rate than placebo users.

B VITAMINS

A regimen of B vitamins, including folic acid, vitamin B-12 and vitamin B-6, has been touted as a way to improve heart health by lowering homocysteine, an amino acid thought to be a risk factor for heart attack. But last week, two studies presented to the American College of Cardiology showed that while the vitamins do lower homocysteine levels, taking them doesn't lower risk for heart attack.

The patients in the studies weren't healthy. They had diabetes, heart disease or a history of heart attack. The New England Journal of Medicine said the consistency of the results "leads to the unequivocal conclusion" that the vitamins don't help patients with established vascular disease.

But the medical community remains divided on whether the vitamins might still be useful for healthy people. "This should not close the book on the investigation of whether B vitamins in a healthy population helps reduce risk of cardiovascular disease," says Dr. Shao of the Council for Responsible Nutrition.

Not all the research into vitamin B is controversial. Folic acid supplements for women of child-bearing age have dramatically reduced the incidence of neural-tube defects in babies. Elderly people can develop an inability to absorb vitamin B-12 from food, so supplements may be recommended as we get older.

CALCIUM AND VITAMIN D

A 2005 study in the British Medical Journal didn't show any reduction in fracture risk among women who took 1,000 milligrams of calcium with 800 IUs of vitamin D a day. But the Women's Health Initiative recently suggested that calcium and vitamin D may lower hip-fracture risk in women over 60. Calcium users, however, had a 17% higher risk for kidney stones.

Elderly people, particularly those who have dark skin, get little exposure to sunlight and don't drink milk, are at risk for vitamin D deficiency and are typically advised to take supplements. One study suggests the most benefit comes with about 800 IUs of vitamin D a day.

Most doctors and health experts now suggest that consumers interested in taking vitamins stick to a multivitamin rather than concoct their own cocktails of high-dose vitamins. But even this practice is being questioned because there's little evidence to support it. In August the British Medical Journal looked at multivitamin use among elderly people for a year, but found no difference in infection rates or visits to doctors.

Researchers urge caution when interpreting results from various vitamin studies. Many factors, ranging from the type of vitamin to the age and health of the participants, may influence the results, says Marion Dietrich, postdoctoral associate in the Nutritional Epidemiology Program at Tufts University. What is clear, however, is the important role a healthful diet plays in preventing illness. Large dietary-intervention studies have shown that a healthful diet reduces risk of cardiovascular disease.

But doctors say many patients view vitamins as a quick fix to compensate for poor eating habits, and resist any suggestion that taking them may not be beneficial. "A lot of people are passionate about their vitamins," says Dr. Miller of the National Institute on Aging. "I don't know where they get it from, but it's not based on scientific evidence."

--Ms. Parker-Pope, who writes The Wall Street Journal's weekly Health Journal column, served as contributing editor of this report.

Write to Tara Parker-Pope at healthjournal@wsj.com

posted by MobyGrape @ 5:06 PM 0 comments

Incentive Plan In South Africa, Insurer Gives Points For Healthy Living

Incentive Plan In South Africa, Insurer Gives Points For Healthy Living

Frequent-Flier-Style Program
Rewards Diligent Members;
Model for U.S. Overhaul?
A Diabetic Wins Elite Status
By RON LIEBER
February 21, 2006; Page A1

JOHANNESBURG, South Africa -- Taking care of your body should have its own rewards. But a South African health-insurance company is adding some new lures: discounts on travel, movie tickets and electronics.

Just as frequent fliers accumulate miles, South Africans covered by Discovery Health can collect points for doing such healthy things as quitting smoking, exercising or getting an annual Pap smear.

In South Africa, one of the few countries whose health-insurance system resembles America's, Discovery is the biggest player in the industry. The company specializes in a type of insurance that is just beginning to take off in the U.S. -- a "high deductible" plan in which people have to foot the bill for much of their basic care themselves.

By combining those plans with incentives for healthy living, Discovery founder and Chief Executive Adrian Gore says he has found a model for the U.S., where President Bush is touting a consumerist approach to restraining health costs.

Critics call Discovery's points system a marketing gimmick designed to attract healthy people to the company while leaving the sick for someone else to cover. They say average people, if forced to spend their own money on health care, are apt to make penny-wise, pound-foolish choices such as forgoing treatment in the early stages of an illness.

Whatever Discovery's advantages, they are available only to a small sliver of South Africans. About seven million people in this nation of 47 million have private insurance, entitling them to use a system of private doctors and hospitals that is considered on a par with Western nations in quality. The rest -- including most of the estimated five million people infected with the AIDS virus -- are stuck with the public system of hospitals and clinics, which are mostly underfunded and overwhelmed.


Niel Uys, a 46-year-old technical support manager for International Business Machines Corp. in a Johannesburg suburb, says he and his family have "done virtually everything you could do" to earn points in what Discovery calls its Vitality program.

In 2005, that included logging on regularly to Discovery's Web site, getting a flu shot, not smoking, maintaining his goal weight and getting graded for fitness. He received extra points for being fit. "We are all more healthy and hopefully our life expectancy will be a little bit better," he says.

Thanks to his "gold" status in Vitality, Mr. Uys has received deep discounts on hotel and resort stays. Last year, his wife spent four weeks in a hotel near Durban for nearly $26 a night, a quarter of the usual price. This year, however, he says he is disappointed that the discounts don't seem to be as large.

Discovery has a 26% share of the private-insurance market in South Africa, at least twice that of its nearest competitor. The majority of insured South Africans have high-deductible plans and have put aside some of their income in a savings account with tax advantages to spend on medical care. That is the combination President Bush is promoting in the U.S.

Most of Discovery's rivals in South Africa have tried to copy its points program, and the idea is making some headway in the U.S., too. In 2003, PacifiCare Health Systems (now part of UnitedHealth Group Inc.) introduced a HealthCredits program that gives people points for taking part in such programs as smoking cessation and weight loss.

In the next two months, Humana Inc., Louisville, Ky., will be adding a rewards program created by Virgin Group's Virgin Life Care unit to certain new insurance plans. The new plans, which the companies will introduce in San Antonio and Tampa, are called HealthMiles Plus. Discovery itself has started a U.S. subsidiary offering South African-style plans in several states.

Discovery says preliminary studies of its South African members suggest its incentives are having an impact. The most striking result: People age 50 to 54 who were actively chasing wellness points saw their health spending decrease even as they aged. However, the data cover only a few years and haven't been published in a medical journal.

Discovery's points program was born amid competitive threats from companies including UnitedHealth, of Minneapolis, which entered the South African insurance market in mid-1990s. UnitedHealth was selling U.S.-style managed-care plans to South African employers. In such plans, employees typically get most of their medical bills covered so long as they receive care from certain preferred doctors and hospitals.

Mr. Gore, an actuary by training, had started Discovery Health in 1992 with a different approach. His insurance plans required individuals to pay their own bills up to a fairly high amount by South African standards. Today that deductible is around $1,800 annually for a family of three in a comprehensive plan. Mr. Gore coupled the stick with a carrot: Employees could put aside money in a tax-advantaged medical-savings account. If they didn't spend it all in one year the money would carry over to the next.

Battling UnitedHealth, Mr. Gore searched for a marketing hook. He says he dreamed one up sitting in the bathtub one night in 1997. A chain of local health clubs had approached him asking whether Discovery wanted to market its insurance to club members. Thinking it over, Mr. Gore hit upon a better idea: giving a free health-club membership to those who signed up for Discovery's insurance. From there the idea expanded. Those who lived a healthy lifestyle and got their checkups would get points for discounts on airplane flights and the like.

Today, about 1.9 million people are covered by Discovery, and 70% of those eligible to join the Vitality points program do so. Membership in Vitality costs about $13 a month for a single person, although employers sometimes subsidize those fees. The rewards include cheap flights within South Africa on British Airways and a discount of as much as 70% on movie tickets.

Gym memberships are free after a one-time sign-up fee for people who go at least 24 times a year. Vitality gives 150 points for each workout. A full set of cholesterol, glucose, HIV and blood-pressure tests can yield thousands of points. Those with 100,000 points achieve the highest status and the steepest discounts. Everyone starts over again each year.

Skeptics in South Africa, including officials at the nation's health-insurance regulator, say Discovery's rewards program isn't the win-win situation the company claims. They believe the real goal of the program is to attract a vigorous, health-conscious clientele and discourage older and sicker people from signing up for Discovery's insurance plans.

"You discount things that younger and healthier people tend to like," says Alex van den Heever, a senior technical adviser at the regulator, which is called the Council for Medical Schemes.

A Familiar Problem

The problem of cream-skimming by insurers is a familiar one to health economists, and recently South Africa has taken steps to prevent it. Starting in about a year, companies whose insured populations are disproportionately filled with the young and healthy will have to pay a penalty. Discovery says its customer base is close to average now, and it doesn't believe its success is the result of cherry-picking healthy people.

Discovery Holdings, the parent of Discovery Health, saw net profit jump 40% in the year ended June 30, 2005, to $97.4 million. The company is majority-owned by FirstRand Ltd., a South African financial-services company, but trades separately on South Africa's main stock exchange. Its stock price has more than doubled since the beginning of 2004.

Rival UnitedHealth, meanwhile, is long gone from South Africa. It pulled out of the market after its managed-care plans failed to attract much business.

Discovery's rewards program has helped it attract new customers. Shoprite Checkers Ltd., South Africa's largest retailing company, used to have a plan in which insurance simply paid for a set percentage of health expenses. "Young people were joining the company and saying 'Why can't you have Discovery?' " says Johan van Zyl, a personnel manager at the company. He says Discovery has kept Shoprite's average annual premium increases in the single digits, compared with double-digit rises at many U.S. employers.

In the U.S., insurance plans combining a high deductible with a medical-savings account often are referred to as "consumer-directed" or "consumer-driven" plans. About 4.6 million Americans are covered by a plan combining these two elements, according to estimates by HSAfinder.com and the trade publication Inside Consumer-Directed Care. Only a handful, however, have a rewards program for healthy behavior.

Advocates of the plans believe consumers are apt to overuse health care when they don't have to pay much out of pocket for it -- and that they spend money from their own pockets more wisely. Critics question those assumptions, saying people are prone to hurting their long-term health by skimping on preventive care. "High cholesterol takes 20 years to make its mark, and hypertension takes 25 years," says Tony Behrman, a doctor who heads an association of general practitioners in South Africa.

Amid that debate, Discovery says its unpublished data offer some evidence that people forced to consider their medical spending more carefully can make good decisions and avoid hurting their health.

The impact on spending is clear: The plans have led to 20% to 40% reductions in what the company terms "discretionary" spending on dieticians, dermatologists and physical therapists.

The company says people under 60 with chronic conditions achieved elite status in the points program at a slightly higher rate than those who are healthy, even though the healthy have an edge because it may be easier to rack up points for physical fitness.

Iqbal Cassim, a 45-year-old insurance broker in a Durban suburb who is diabetic and has struggled with high cholesterol, is an elite member. He says his secretary prints out a list of point-earning activities at the beginning of each year and reminds him to check them off. He usually requalifies for top-level status during the first third of the year.

Those with elite-point status generally cost Discovery less than those who fail to sign up for the points program. That isn't surprising because the elite members usually are either healthy people or those who desire to get healthy.

Changing Costs

Another measure of the Vitality program's value is how members' health-care costs change over time. The insurer measures this using the "loss ratio," which is the cost of paying a member's annual health claims divided by the annual premium. If the insurer receives $5,000 in premiums and pays out $2,500 to cover claims, the loss ratio is 50%.

Discovery examined 1,467 insured people age 50 to 54. From 2000 through 2003, those with elite status in Vitality saw their loss ratio fall to 70% from 73%, while the loss ratio for nonelite members rose to 80% from 72%. In the 30-34 age bracket, members in both the elite and nonelite categories saw loss ratios rise but the ratio rose faster for nonelite members.

Discovery says the study excluded those with family coverage and focused on individual members so that it could be sure the person racking up the points was the same one filing the health claims.

The bottom line seems to suggest some health benefit for eager point-getters, but Discovery's own actuary, Mark Litow of Milliman Inc., acknowledges "we'd have to follow it much longer" to prove anything. Also, separating cause and effect is difficult: It is possible that the elite Vitality members would have pursued a healthy lifestyle even if they didn't get rewards for it.

Alex van den Heever, the senior adviser at the government regulator, says: "I do not trust any commercial entity that has a big financial incentive to produce research." Discovery's Mr. Gore says the government is welcome to examine the raw data. So far the company hasn't submitted the data to a peer-reviewed medical journal. It says it might at some point.

Meanwhile, Discovery has brought its Vitality rewards program to the U.S., where it has a subsidiary called Destiny Health. Destiny's South Africa-style plans, which combine a high deductible, a medical-savings account and reward points, are available in Illinois, Maryland, Massachusetts, Texas, Virginia, Washington, D.C., and Wisconsin.

In the U.S., Destiny Health members are automatically enrolled in the points program without charge. As in South Africa, participation can lead to discounts on gym memberships, movies and the like. If many workers achieve elite status, employers can get a premium discount when they renew their insurance. J. Scott Spiker, Destiny Health's chief executive, says it can be a tough sell when he tries to tell potential customers about the South African experience. Nonetheless, he says, "we're quite confident that the same patterns will emerge here in the U.S.A."

Write to Ron Lieber at ron.lieber@wsj.com

posted by MobyGrape @ 6:36 PM 0 comments

How the Amish Drive Down Medical Costs

How the Amish
Drive Down Medical Costs

By JOEL MILLMAN
February 21, 2006; Page B1

LITITZ, Pennsylvania -- When Health Management Associates Inc. opened a regional hospital in Pennsylvania Dutch Country in 2004, it got an unexpected welcome from a group of men wearing broad-brimmed hats and beards.

The delegation of Amish and Mennonite elders came to the Heart of Lancaster Regional Medical Center to haggle with executives there over rates. They wanted discounts for their fellow worshipers, who collectively spend about $5 million a year in Lancaster County for health services, all of it in cash.

Like uninsured patients everywhere, the Amish and Mennonites often are billed a hospital's full retail price for medical procedures and pharmaceuticals, mainly because they don't have a large institution, such as an employer or insurer, to negotiate discounts on their behalf. But unlike many of the uninsured, they were able to organize and drive down the price of medical care in Pennsylvania.

The "Plain People," as Amish and Mennonites call themselves, choose to go without insurance or Medicare as part of their rejection of the secular world. They do without electricity and automobiles in their daily lives. And they rarely sue for malpractice, believing that the outcome of surgery is in God's hands.


What helped make the Amish effective negotiators was the experience many of them have had in getting cut-rate medical treatment in Mexico. They were able to use prices south of the border -- along with their willingness to pay upfront in cash -- as leverage to bargain for lower prices at home.

No deal, no patients, they told the Heart of Lancaster executives. And the medical center proved willing to bend. "We felt we needed to grow the business of this hospital. We also need to be part of a community," says Kimberley Steward, who helped negotiate a deal as the medical center's chief financial officer and now works at Health Management Associates' Mesquite Community Hospital in Texas.

The German-speaking Mennonites and Amish are Anabaptists, a religious denomination that traces its history back to the Protestant Reformation of the 16th century. "Anabaptist" refers to the practice of rejecting infant baptism; only adults are permitted to pledge themselves into the church. They object to medical technology that they believe challenges God's plan, such as organ transplants and in-vitro fertilization, but they don't reject all medical care outright, as some other religious denominations do.

Heart of Lancaster is a small hospital, and its case load is fairly conventional. But the Anabaptists weren't looking for anything exotic. They wanted discounts on services such as orthopedic surgery, biopsies and childbirth. The hospital agreed to discounts of up to 40% off its top rates, resulting in prices that would still be slightly higher than Medicare reimbursements, the level most hospitals consider a minimum. Not satisfied, the Anabaptists pushed the executives to go lower. But the hospital said if it dropped prices to levels below Medicare reimbursements, it could be charged for fraud for charging Medicare patients more.

The Anabaptists accepted the hospital's offer and now pay flat rates such as $16,577.60 for a hip replacement, $3,200 for knee arthroscopy, and $7,542 for a mastectomy. The rates include the hospital stay as well as fees for surgery, anesthesia, medication, testing, medical supplies and occasionally outside specialists. To qualify for these discounts, the Anabaptists pay 50% of the fees upon admission to the hospital. The Anabaptists' rates are still more than what a Medicare patient might expect to be billed, but as little as half the full retail rate other uninsured patients are likely to be charged.

For decades, Anabaptist communities have pooled resources to pay for medical care. But as the cost of a modern-day hospital stay has skyrocketed, cost-sharing has often fallen short. "A man's barn burns down, you can replace it with donated labor in an afternoon. You can't do that with a hospital bill," says Sam Stoltzfus, who farms near Gordonville, Pa. About a third of Anabaptist community resources go to cover health-care costs, he estimates.

Many Pennsylvania Anabaptists who are stretched financially take trains to Tijuana, where private hospitals and clinics usually charge far less than the top rates at Pennsylvania hospitals. After the Anabaptists' busy November wedding season, travel usually picks up in early December. Even though travel expenses can run to $4,000 a person, Anabaptist patients say they save money. "Going to Mexico also provides a little diversion," says Donald Kraybill, a sociologist at Pennsylvania's Elizabethtown College who specializes in Anabaptists. "People who spend their lives in rural settings like to go to a motel sometimes, watch cable TV and eat in a restaurant."

The Oasis Clinic, operated by an oncologist, Adán Ernesto Contreras, is a favorite of the Anabaptists. At a seaside hostel, Anabaptist men stroll along a plaza with their wives, who wear starched, white bonnets. A small plaque on a footbridge reads, "My Hobby Is Driving My Buggy." A bale of fan mail from former patients arrives daily. "Greetings Christians!" begins one letter from Paoli, Ind.

Dr. Contreras, who speaks fluent English, says he is conversant in the archaic Rhineland German many of his Anabaptist patients speak at home. "We treat them body, mind and spirit," he says cheerfully. "Before any procedure, I pray with them." In the lobby and corridors of the hospital, the Amish rub elbows with sheikhs and tanned Californians, who also come to Tijuana for treatment but stay in more expensive quarters.

Back in Pennsylvania, testimonials about cancer and arthritis treatments in Tijuana spread quickly through tight-knit Amish and Mennonite communities. Tijuana's Oasis clinic ran ads this summer in Die Botschaft, an Amish newspaper, promising medicine with "a caring environment, prayer, laughter, faith, hope and love."

Visits from sales representatives of clinics in Tijuana, Ciudad Juarez and Mexicali have become a form of folk entertainment in the rural communities where Plain People live, an evening of charts on easels, testimonials and refreshments for people who avoid most forms of modern media.

For all the come-ons, though, the visits provide Anabaptist elders with medical price benchmarks with which to compare rates at local hospitals. In negotiations with Heart of Lancaster executives, the Anabaptists agreed early on to flat-rate packages, because, like many consumers, they had a hard time making sense of hospital-bill complexities. A full knee replacement costs $14,922.80, including a four-day hospital stay; a partial knee replacement costs $10,500, including a two-day stay.

Heart of Lancaster wasn't worried about risking steep losses if elaborate surgeries went awry: Anabaptist patients generally don't want such procedures. "If you're paying out of pocket, you'll hunt for bargains," says Lee Christenson, chief executive of Heart of Lancaster, who bargained with the Anabaptist elders. "Basically, the Amish won't pay for health care they don't need."

Before cutting the final deal, Heart of Lancaster had to grapple with the issue of whether the package of discounts for Anabaptists could open the medical center to accusations of discrimination from uninsured patients of other faiths. The two sides consulted lawyers, who agreed the hospital couldn't treat uninsured Anabaptists differently than it did other uninsured patients -- even though Anabaptists were pledging to pay upfront, unlike other uninsured. Moreover, the hospital knew that, as a practical matter, virtually every uninsured patient within miles is a member of either an Amish or Mennonite church.

The solution? Anabaptist elders decided that their parishioners would be sent to the hospital only after being referred by local doctors with largely Anabaptist practices. As a legal matter, the discounts are for referrals from these doctors, not for members of a particular church. And the elders pledged that none of the patients sent to Heart of Lancaster would ever sue for malpractice.

posted by MobyGrape @ 6:35 PM 1 comments