Governor Says Plans Could Eliminate Billions in Overdue Medical Debt for Thousands

Gov. Ned Lamont plans to propose legislation to cancel overdue medical debts for thousands of Connecticut residents who he said are struggling to pay their bills.

Lamont is proposing to use $20 million in federal COVID-19 recovery funds from the American Rescue Plan Act to contract with a nonprofit organization that buys medical debt and eliminates it at a fraction of the original cost.

His administration estimates that a $20 million investment has the potential to eliminate about $2 billion in medical debt for Connecticut residents

The governor’s office said 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 said there is no application process for eligible households to have their debt canceled and those whose medical debt is canceled under the proposal would not experience any financial tax burden because the IRS does not count medical debt canceled through nonprofits as taxable income.

“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 in a statement.

“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,” he added.

Lamont also encourages Connecticut residents to use Access Health CT.

Lamont is scheduled to deliver his annual budget address on Wednesday, Feb. 8 at noon.