Connecticut says it will cancel $1 billion in residents' medical debt

Connecticut Democratic Gov. Ned Lamont says his state plans on becoming the first one to cancel medical debt, freeing eligible residents from roughly $1 billion in medical bills by using $6.5 million from the COVID-era American Rescue Plan Act.

Lamont made the announcement Friday on ABC News' "Good Morning America," saying that people in debt from medical bills "should not have to suffer twice — first with the illness, then with the debt."

Lamont plans on using the 2021 Rescue Plan funds to contract with a nonprofit organization to buy medical debt and eliminate it at a fraction of the cost. The way this works is that the non-profit buys the debt, just like for-profit debt collection firms do, but instead of then pursuing the collection of the debt from the individuals, the non-profit firm just notifies the individuals that their debt has been canceled, according to NPR. 

Connecticut residents will be eligible for the program if their household income is up to 400% above the federal poverty line, which is just under $125,000 annually for a family of four. Residents whose debt amounts to 5% or more of their annual income will also be eligible for debt cancelation. 

The initial $6.5 million investment is expected to erase the debts of 250,000 residents, per the state.  

While Connecticut plans to be the first state to cancel medical debt, New York City said last month it would invest $18 million to cancel $2 billion in medical debt for up to half a million eligible residents over the next three years.

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