Connecticut to become 1st state to cancel medical debt, wiping out $1B for 250,000 residents: Gov. Lamont

Connecticut Democratic Governor Ned Lamont told ABC News' "Good Morning America" on Friday that the state plans to become the first in the nation to cancel medical debt for eligible residents.

The state estimates that 250,000 residents could see approximately $1 billion of medical debt cleared. Those whose household income is up to 400% of the federal poverty line or whose medical debt equals 5% or more of their annual income could be eligible for the cancellation program, ABC News reported.

According to the state, it will work with a nonprofit organization that purchases debt and eliminates it at a reduced cost. The contract agency will partner with state agencies to cancel the medical debt automatically. Therefore, residents will not need to apply. The cancellations should begin rolling out by June, the state told the news outlet. It also noted that more than one in 10 residents have medical debt in collections.

"This is not something they did because they were spending too much money," Lamont stated. "This is simply because they got hit with a medical emergency. They should not have to, you know, suffer twice — first with the illness and then with the debt."

"I think it's really important that people have a sense that they can start building wealth of their own," he continued. "We're making that easier for people to do -- and the best way to start is eliminate the debt you've got."

Connecticut plans to erase some of the debt by using $6.5 million from the American Rescue Plan Act, signed by President Biden (D) in 2021.

Other cities and counties — including New Orleans, Louisiana; Pittsburgh, Pennsylvania; Toledo, Ohio; and Cook County, Illinois — are using funds from the American Rescue Plan to eliminate residents' medical debt. New York City Mayor Eric Adams (D) recently announced that his administration will cancel over $2 billion in medical debt for 500,000 residents, Blaze News previously reported.

The Biden administration reported that $16 million in funds is being used to terminate approximately $1.5 billion in debt nationwide.

According to the Consumer Financial Protection Bureau, medical debt accounts for over 50% of debt in collections — more than other sources of debt combined, including credit cards, personal loans, utilities, and phone bills.

Lamont first announced his plan to eliminate medical debt last February.

"Several state and local governments have seen significant success at canceling medical debt for their residents using this model, and I think this is absolutely the right way to use this COVID-recovery funding," Lamont said. "This initiative will not only help Connecticut residents who are saddled with debt financially, but it also lifts the significant emotional toll that this type of debt has on individuals who do not have the means to get out, especially for those who are simultaneously experiencing significant medical problems. This debt erasure will put millions of dollars back into the Connecticut economy and provide an economic stimulus to local communities."

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