HARTFORD, CT (WFSB) – The Lamont Administration announced a proposal on Thursday to cancel overdue medical debt for Connecticut residents who have struggled to pay their bills.
Gov. Ned Lamont participated in a news conference about it on Thursday morning in Hartford.
He said he based the proposal on a model that other governments throughout the country have used. It called for the state to invest $20 million in federal COVID-19 recovery funding it received from the American Rescue Plan Act and use it to contract with a nonprofit organization that buys medical debt and eliminates it at a fraction of the original cost.
The nonprofit will contact local hospitals and hospital systems directly, purchase entire portfolios of debt owed by eligible households, and negotiate with the hospitals to cancel that debt, Lamont explained. There is no application process for eligible households to have their debt canceled. In other jurisdictions that pursued the same strategy, the amount of medical debt canceled for households ranged from $25 to six-figure amounts.
Lamont said two-thirds of personal bankruptcies are caused by medical debt.
One nonprofit working under this model states that it has been able to generate more than a one-to-100 return on investment of government dollars. It said it was because hospitals often sell medical debt for pennies on the dollar.
The Lamont administration estimated that the $20 million investment has the potential to eliminate about $2 billion in medical debt for Connecticut residents.
The investment will be included as a component of Lamont’s fiscal years 2024 and 2025 biennial state budget proposal, which he plans present to the General Assembly next week.
“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.”
The Lamont Administration cited U.S. Census Bureau data that said approximately 19 percent of American households carry medical debt, and the median amount owed is $2,000. The data also said medical debt disproportionately impacts Black and Latino families – 27.9 percent of Black families and 21.7 percent of Latino families have medical debt, compared to only 17.2 percent of white households. About 31 percent of households with a member in fair or poor health have medical debt, compared to 14.4 percent of those with no members in fair or poor health. More than one in four households with at least one member with a disability have medical debt, compared to 14.4 percent of households with no members of disabilities.
Individuals who have their medical debt canceled under Lamont’s proposal will not experience any financial tax burden associated with this assistance because the IRS does not count medical debt canceled via nonprofits as taxable income, the administration said.
To reduce the chances of medical debt building up again, Lamont encouraged Connecticut residents to take advantage of a number of no-to-low cost insurance options through qualified health plans under Access Health CT.
Lamont is scheduled to deliver his annual budget address to the General Assembly on Feb. 8 at 12 p.m.
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