Connecticut to Become First State to Cancel Medical Debt, Governor Says

Connecticut Gov. Ned Lamont speaks during a visit to a vaccination clinic in Stamford, Conn., on March 14, 2021. John Moore/Getty Images

Connecticut plans to eliminate medical debt for all eligible residents this year, making it the first state to offer such a relief program, Gov. Ned Lamont said in an interview on Friday.

Mr. Lamont unveiled the plan during an appearance on ABC’s “Good Morning America,” which will include using $6.5 million in funds from the American Rescue Plan Act to erase $1 billion in medical debt.

He said the state will partner with a nonprofit organization that purchases and cancels medical debt. Eligible residents include families whose medical debt represents 5 percent or more of their annual income.

“This is not something they did because they were spending too much money, this is something because they got hit with a medical emergency,” Mr. Lamont told the news outlet.

“They should not have to suffer twice—first with the illness, then with the debt,” he added.

The relief, set to commence in June, is expected to aid approximately 250,000 residents in Connecticut, according to the report. There is no application process for the program.

“I think it’s really important that people have a sense that they can start building wealth of their own,” the governor said.

“We’re making that easier for people to do—and the best way to start is eliminate the debt you’ve got,” Mr. Lamont added.

The Biden administration announced in September that it was planning to bar medical debt from negatively impacting the credit scores of millions of Americans.

Aside from Connecticut, New York City has also announced plans to invest $18 million over three years to relieve over $2 billion in medical debt for up to 500,000 residents.

Mayor Eric Adams speaks at the Museum of the City of New York’s Centennial Gala honoring Michael R. Bloomberg in New York, on May 24, 2023. Bryan Bedder/Getty Images

NYC stated that the one-time debt relief program will launch in early 2024 and run for three years.

“No New Yorker should have to choose between paying rent or for other essentials and paying off their medical debt, which is why we are proud to bring this relief to families across the five boroughs, as we continue to fight on behalf of working-class New Yorkers,” NYC Mayor Eric Adams said on Jan. 22.

Medical debt is the number one cause of bankruptcy in the United States. Around 20 percent of Americans acknowledged having medical debt, equating to roughly 66 million people, according to a report by the Consumer Financial Protection Bureau (CFPB) from 2022.

The CFPB’s earlier analysis found that medical billing data in credit reports is less reliable for predicting future repayment than traditional credit obligations. This is due to common errors and inaccuracies, further compounded by issues like insurance disputes and complex billing practices.

“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” CFPB director Rohit Chopra said.

“When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe,” he added.

A 2023 report by the Centers for Disease Control and Prevention states that the percentage of Americans who are part of families having trouble paying their medical bills in the past year decreased from 14 percent in 2019 to 10.8 percent in 2021.

“People who have medical debt may pay off these bills by taking on other forms of debt, including credit cards and bank loans, or negotiate payment plans with healthcare providers, or just fail to pay them.

“However, medical debt continues to be the major form of debt in the United States,” the report reads.

Apart from medical debt, Americans, mostly between the ages of 18 and 39, are also grappling with credit card debt.

Rising living costs are pushing more Americans to rely on credit cards, leading to a historic milestone with U.S. credit card debt recently surpassing $1 trillion.

Caden Pearson contributed to this report.