Connecticut will cancel medical debt for all eligible residents, its governor announced on Friday, making it the first state to do so.
Gov. Ned Lamont said during an appearance on “Good Morning America” that the state would erase medical debt for thousands of residents who qualify under a new initiative that intends to help lift people from an often tremendous financial burden.
“This is not something they did where they were spending too much money. This is because they got hit with a medical emergency, and they should not have to suffer twice: first for the illness, then with the debt,” Lamont said.
Eligible residents will not have to apply for the relief as the state will work directly with a contracted agency to eliminate medical debts. This relief should go into effect by June, the state said.
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Those who ultimately have their debt cleared will also not have any associated tax burden, as the state said the IRS does not count medical debt canceled via nonprofits as taxable income.
According to “GMA,” qualifying residents include those “whose household income is up to 400% of the federal poverty line (for a family of four, that’s $156,000 annually) or whose medical debt equates to 5% or more of their annual income will be eligible under the program.”
The new state plan intends to leverage $6.5 million in American Rescue Plan Act funds to erase approximately $1 billion in medical debt, Lamont said.
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The governor initially announced the proposal on the same day last year, tying the relief to COVID-related funds.
“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 on Feb. 2, 2023.
He added: “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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Nearly 1-in-5 households across the U.S. have at least some medical debt, according to the U.S. Census Bureau. The median amount owed is $2,000.
While Connecticut is hoping to become the first state to erase medical debt, several cities, including New York City, New Orleans and Pittsburgh, have also announced or implemented similar plans.