Connecticut To ‘Cancel’ $1 Billion In Citizens’ Medical Debt

In a first-of-its-kind move, Connecticut officials plan to cancel $1 billion in residents’ medical debt. And the expansive program will qualify recipients who earn up to 400% over the federal poverty limit.

Democratic Gov. Ned Lamont announced his intentions on ABC News’ “Good Morning America” on Friday. The funds to implement the pilot program will come from the American Rescue Plan Act which was part of Washington’s reaction to the COVID-19 pandemic.

The idea, Lamont told the outlet, is to leverage $6.5 million that is available in the federal program to erase roughly $1 billion. The tremendous losses on the balance sheets of healthcare providers were not addressed.

Lamont told the audience that people who take on debt from medical situations “should not have to suffer twice — first with the illness, then with the debt.”

The governor’s plan is to contract with a non-profit entity to purchase debt carried by Connecticut residents. He believes these obligations may then be discharged at a fraction of the original cost. 

NPR reported the system would work in a similar fashion to traditional debt collectors who purchase consumer debt.

However, instead of turning around and pursuing payment from the resident, the non-profit would notify the debtor that their obligation has been fulfilled.

Eligibility for the program is open to a wide array of households. Income for a family of four could not exceed $125,000 annually, and those whose debt consumes 5% or more of their intake would also qualify.

Residents who qualify for the program will not need to apply. The plan is for the state to work directly with the non-profit agency and eliminate the debt as soon as June.

There would also be no tax burden for beneficiaries. State officials confirmed the Internal Revenue Service does not count obligations canceled by non-profits as taxable income.

When the Democrat initially announced his intentions last February, he cited success by multiple state and local governments in doing the same. Lamont declared his belief that “this is absolutely the right way to use this COVID-recovery funding.”

He further claimed millions would be injected into the Connecticut economy, providing an “economic stimulus to local communities.”

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