A friend of mine is the office manager for a non-profit organization. It's a small group, six or seven people total. It was formed from a merger of two or three other, still smaller groups. Yet between Federal, state, and private donations the group receives and distributes several million dollars.

My friend, I'll call her Janet, is not a trained financial person, but she was given responsibility for pulling together the entire accounting system, merging three, almost non-existing systems into one. This she did and was pretty proud of herself.

The auditors were coming and she figured she'd get some well-deserved praise for her efforts and perhaps some tips on how to make it better. Instead the auditors told her that she was precisely the type of person who steals from non-profits. The auditors offered virtually no useful suggestions, but instead berated her and people like her for being thieves at heart and suggested draconian multi-layer signatory responsibilities that simply were impractical in a seven-person office. This occurred before the Arthur Anderson/Enron debacle or perhaps my friend would have had a good comeback.

She was crushed, angry, and confused. She confided that, if it had been in her nature to steal, she certainly was given a motive.

So what went wrong? And what in the heck does this have to do with responsibility versus entitlement?

The auditors were, of course, correct. People who steal from non-profits do look very much like my friend Janet. They are usually female, underpaid for the responsibility they are given, middle-aged or older, and trusted. Of course that describes nearly everyone who holds the job she holds. The auditors succumbed to faulty logic. The kind of logic we get fed on talk radio and that gives us racial profiling. If you diagramed it, the logic goes something like this. A steals. A has characteristic Y. Therefore all people with characteristic Y steal. An obviously faulty syllogism that ignores that fact that 99.99% of the people with characteristic Y do not steal.

This is precisely the kind of thinking that creates the responsibility versus entitlement argument. There is an attitude among benefit managers and corporate executives that employees treat medical care as an entitlement, while ignoring their own, personal responsibility for their health. There is an attitude among employees that medical insurance benefits are, in fact, compensation and that corporations, particularly self-insured corporations, do their best to avoid the responsibility of paying legitimate claims, essentially "stealing" the compensation back. Medical insurance benefits, which were created as a win/win proposition, have become instead, a lose/lose proposition. How come?

The "how come" is that medical costs have gone through the roof. What was once a relatively inexpensive benefit is now a staggering cost. Corporations that took on self-insurance as a means to manage premium costs now find themselves shouldering costs far above their expectations. And those corporations that lay off the risk onto third party payers are not better off. Premiums are based directly on claims experience. It only takes one catastrophic claim to send premiums through the roof.

The "how come" on the employee's side is that the medical insurance benefit has, since its introduction, been positioned as a means of protecting the employee from health care worries. It was a "peace of mind" benefit that let an employee focus on his or her work without worrying about the cost of a pregnancy or an injury. The extension of insurance to the family added even more peace of mind. "Tiny Tim" needn't worry about getting that operation so he could walk again. Nothing in the health insurance benefit was ever contingent on the employee's management of health risk.

There is, of course, a third player -- really two. The healthcare providers and the medical device and pharmaceutical industry that provides the "product" of health care. This magnificent industry has pushed the state-of-the-art in medical treatment at an accelerating pace -- and at an accelerating cost. Hugely important gains are being made in the understanding of how our bodies tick and in how to fine-tune that ticking. These gains are accompanied by massive advertising that promote these new medical solutions to the consumer -- who just happens to be the employee, who looks in turn to his or her employer and/or insurance carrier to pick up this cost.

Missing from the understanding of any of the involved advocacy groups is the simple dynamic known as the Pareto principle. Named for an Italian economist, this principle simply embodies the old 80/20 rule. In healthcare that means that 80% of cost will be incurred by 20% of patients. It is absolutely true. In fact, 5% of employees in a typical large corporation will account for 50% or more of healthcare costs.

What we have is a few people with very great needs and a large majority of the population with relatively minor healthcare needs. If the situation is seen in that light and understood in that light, then much of the animosity should go out of the discussion.

We need not treat employees like medical cheats, investigating to see if they are shirking and making false claims. We can begin with the assumption that 99.9% of the population wants as little to do with the medical community as possible. They participate in screenings and examinations only at great urging. Otherwise they use the medical system only when something goes wrong. And that is a problem. That is where we need to focus the message of "responsibility." Employees should be encouraged to take a proactive interest in their own health. They should be "coached" in developing a health management plan that does include those routine screenings and examinations that catch serious illness before it is catastrophic. They should be encouraged in healthy habits -- nutrition, exercise, and stress management -- that are proven to reduce the incidence and severity of medical problems. The cost of a health-focused program of this nature is very low compared to the cost of treating the disease and physical conditions that result from risky behavior. A corporate attitude that focuses on health delivers positive productivity gains.

Conversely, corporations need to decide if they are in the health insurance business and if health insurance should be part of their benefit package. If it is a benefit, then make no mistake, it is a responsibility and employees are entitled to it because it is offered in lieu of dollars that would otherwise be paid directly in compensation. Despite the costs associated with health insurance we didn't see companies backing away from this benefit when the unemployment rate was 4% or less. We shall see what happens as we drift back towards 6%, if indeed that is what occurs. My sense is that the payoff for corporations is high in terms of attracting and keeping the people they want as employees.

But just because corporations take on this responsibility doesn't mean that they shouldn't better manage the associated cost. That management should focus on the Pareto group -- the people who actually represent the cost. This group is easily identified and easily classified into those who are simply victims of chance -- the problem birth, the seemingly healthy individual who has a unexpected heart attack, the accident with no associated fault -- and those with chronic illnesses or other conditions that represent ongoing high medical cost. The "chance" element of cost must be simply managed as a risk factor in corporate financial planning. Persons with chronic conditions can be helped through focused coaching to both improve their quality of life and reduce their medical costs by being shown how to manage their condition. Believe it or not, most people welcome this help.

The win/win is to accept both. Offering medical insurance as a benefit does mean that employees should feel entitled to use the medical system and have their costs covered. The "peace of mind" benefit is very real and the corporation gains in employee loyalty and productivity from this benefit. But entitlement doesn't free employees from responsibility. Strong programs that encourage employees to take charge of their health pay off in long-term reduced usage of the system and healthier, more productive employees. And the corporations should take on responsibility as well. Responsibility to assure that the workplace is healthy and that corporate processes, procedures, and practices promote personal health.

Finally, both the "peace of mind" benefit and cost management benefit from an active program to help people with chronic illnesses or conditions manage their situation for maximum quality of life. It not only reduces actual costs. But this sign of a caring corporation delivers tremendous benefits in esprit de corps. Judicial financial planning around the catastrophic element of health care cost will at least help companies manage their cost expectations and provide opportunities to lay-off risk through various reinsurance options.

\WALTER S. ELIAS, PhD is President of Elias & Associates, Inc., a health care management consulting practice.