Governor Deval L. Patrick
Associated Industries of Massachusetts 96th Annual Meeting
Westin Hotel, Waltham
May 13, 2011

Thank you for inviting me to join you today. I hope we can spend most of our time in conversation, but allow me some brief comments at the outset about where we are as a Commonwealth and where we are going.

I don't believe in leaving the future entirely to chance. So, we have had a plan from the start to grow jobs and expand opportunity - one based on education, innovation and infrastructure. We stuck with that plan, even through the worst of the global recession.

First is education. I've spent most of my professional life in the private sector and done business all over the world. And I can tell you, if you don't know already, that education is our international calling card. We have an unusually high concentration of great public and private universities - nearly 300 in New England. That has spawned countless research institutions, teaching hospitals and the like. Our workforce is well known for its high level of education. So, we've supported education by investing in our public education system at the highest levels in the history of our state, even when the bottom was falling out of the rest of the budget.

And we've added reforms that raise teacher accountability and encourage more innovation in the classroom to reach the kids stuck in the achievement gap. These investments in money and time work: our students rank first in the nation in student achievement, and have for each of the last five years. We rank in the top five internationally in math and science. And we were the top scorer in the national Race to the Top competition.

Next is innovation. Our concentration of brainpower, research institutions and venture capital, our well-educated work force, our entrepreneurial traditions make us uniquely suited to appeal to the innovation industries, like biotech and the life sciences, clean energy and IT. This is not, as some have said, about picking winners and losers. It's about playing to our strengths - the same way that my counterparts in Texas or West Virginia or Iowa cultivate their oil or coal or corn industries. Intellectual horsepower is our advantage. That means we have a particular attraction, a sweet spot, for industries that depend on brainpower.

What's especially exciting is that we are making more of the things we invent. Manufacturing -- especially precision manufacturing -- is making a comeback. It's biopharmaceuticals and medical devices. Solar panels, wind blades, insulation and smart meters. I visited a precision manufacturing facility in Great Barrington last week that makes synthetic organs for surgeons to practice on. Their fake hearts beat and plastic livers feel slimy to the touch. And they are supplying customers around the Commonwealth and around the world.

Massachusetts is home to 8,000 manufacturers - the fourth largest employer in the Commonwealth. To encourage more growth, I am pleased to announce this morning an expanded BuyMass Initiative:

To make it easier to "Buy Massachusetts," we have strengthened, an online supply directory that includes over 6,000 Massachusetts companies. New upgrades to the site will now allow potential customers to search for local companies by product, industry, location or designations such as minority owned enterprise or ISO 9000 certified. And we will host a series of regional supplier matchmaking events throughout the Commonwealth to match the resources of our homegrown suppliers with the needs of global businesses working right here in Massachusetts. The first event - which occurred just last week - connected officials from Raytheon with 15 potential business partners based in Western Massachusetts.

Thanks to Rick Lord and others in this room for helping with this initiative.

So education and Innovation. And then Infrastructure. This is the unglamorous work of government, but it enables the rest - and it has been neglected for a very, very long time. Road, rail, bridge projects. Broadband expansion. Affordable and public housing. Recreational facilities. Fixing up our public college and university campuses. All of this is creating jobs right now and also building a platform for future growth. We need 21st century infrastructure to move goods, products, ideas and investment to every corner of the Commonwealth, and between the Commonwealth and the world.

So, that's our strategy. And it's working.

We are creating jobs faster than most other states; our unemployment rate is well below the national average; our economy is growing at twice the national rate; and CNBC has moved our state up to the fifth best place in America to do business. Our bond rating has not only remained strong, but gotten stronger - the only state in America whose rating has improved since 2007.

Our students outperform their peers around the nation and we won the national Race to the Top competition.

And 98 percent of our residents have health insurance today. 99.8 percent of children. No other state in America can touch that.

We are making progress. But there is still work to do. Especially around business costs. And there is one in particular - health care costs - that I want to spend another minute on this morning.

It's important to separate the success of health care reform from the challenge of rising premiums. The 2006 health care reform law is something of which we all can be proud. It is an expression of shared values, our belief that health is a public good and that everyone in Massachusetts deserves access to good care.

Now, more people are getting preventive care instead of waiting until they have to go to the emergency room. The percent of private companies offering health insurance to their employees is up, from 70% before the law was signed to 76% today. Health care reform is doing exactly what it was designed to do: expanding access to quality health care to all our residents. And expansion itself hasn't broken the bank: with 98 percent of our residents covered, health care reform has added only 1 percent of the state spending to the state budget.

For five years now, universal coverage has been working in Massachusetts. And I am proud that we are the model for the Affordable Care Act, signed into law by President Obama last year.

But health care premiums continue to increase at an unsustainable rate. It's not a challenge unique to Massachusetts and it has nothing to do with our health care reform. Premiums increased across the Nation on average 130 percent over the last decade. Mississippi, which has nothing even close to universal care, has seen premiums increase 113 percent. The point is that, across the Nation, just like across the Commonwealth, working families, small businesses and governments alike are being squeezed by ever-higher premiums.

This is especially true for small businesses. I meet many small business owners who are beginning to see their commercial activity pick up and are ready to start hiring again - until they get their annual health insurance hike. Double digit increases send you scrambling to find new carriers, with less coverage at the same price or the same coverage with higher deductibles, in an annual ring-around-the-rosy of shifting plans. I have yet to meet a business owner in the state, especially a small business owner, who doesn't see health care costs as a significant impediment to adding jobs. And with small businesses making up 85 percent of the businesses in this state, if they don't start hiring, we don't get a recovery.

That's why controlling health insurance costs is and must be a priority.

In April of last year, the Commissioner of Insurance disapproved nearly all of the proposed rate increases put forward by private insurers. It was a drastic step but there were no other options. We simply couldn't have another year of double-digit increases in premiums. That decision set in motion a series of negotiations and settlements that led to a $106 million reduction in the base rates carriers originally proposed.

Last summer, I signed a bill that allows small business associations to band together to design products and buy insurance, and requires insurers to offer small employers limited network plans that cost at least 12 percent less than conventional ones. The intent here is to maximize small businesses purchasing power and also expand the availability of plans that rely on a smaller network of providers.

And this February, I proposed the next big step, a bill to change how we pay for and provide health care. The good news is that there's an emerging consensus about solutions. By most accounts, higher quality care -- meaning well-integrated, "whole person" care -- equates to lower cost. Instead of the fragmented, fee-for-service system we have today, we ought to pay for integrated care. Paying for that kind of care will encourage different kinds of behaviors in the delivery of care - with the added benefit of restraining cost increases.

The plan we have proposed, this next step in reform, gives doctors, other medical professionals, hospitals and insurers some new tools and ways to innovate costs down. We want to see more integrated care organizations and alternative payment methodologies that reward care that emphasizes the wellness of the patient.

There are many good things happening in the market right now, in providers large and small, in care settings across Massachusetts. But we need to scale those up, we need a set of common expectations and standards, and we need the savings to be passed on in the form of lower premiums. That is where we are going. And we need to get there quickly.

And while I am a capitalist, having spent most of my life in the private sector, I am not a market fundamentalist. I don't think the market always gets it right, and I don't think the market has got it right when it comes to health insurance premiums. We are going to have to solve this problem of health care cost by all of us -- public and private -- working together.

When we get there, this will translate into some very real savings that will help you reduce your cost of doing business.

On a trade mission we took to Silicon Valley a couple of years ago, I remember sitting with a group of business people and investors, talking about how we grow opportunity in Massachusetts in the tech space. They acknowledged that we have the talent, the tradition of invention, the venture capital, the ideas. What we lacked, they observed, was the "collaborative gene."

None of the challenges in our communities will be solved by government alone, business alone or universities alone. Working together is how we have become the international hub for the life sciences and biotech, the national hub for green tech, and the regional hub for precision manufacturing. One mayor told me recently that, when it comes to economic development, it is harder and harder to tell where the private sector leaves off and the public sector begins.

We have to practice our ability to look outward, not just inward, to build partnerships with those outside our own expertise, our own economic strata, and our own neighborhood.

Everyone in this room has got to be part of promoting a better Commonwealth.

We have a long history of standard setting for the whole nation. Working together, we will and we can compete - for every job, in every industry, in every corner of the Commonwealth and around the world.

Thank you.