Connecticut set to become first state to wipe out medical debt for eligible residents

Connecticut is set to become the first state to eliminate medical debt for all eligible residents.

The program, expected to commence in June, will be carried out in partnership with a nonprofit organization specializing in acquiring and canceling medical debt. Eligible residents include families whose medical debt represents five percent or more of their annual income.

According to a recent Consumer Financial Protection Bureau report, medical debt in Connecticut surpasses credit cards, personal loans, utilities and phone bills combined. Currently, the state faces a considerable medical debt crisis, with more than one in 10 residents having medical debt in collections.

In a recent appearance on ABC’s “Good Morning America,” Connecticut Gov. Ned Lamont unveiled a plan that utilizes $6.5 million from the American Rescue Plan Act funds to erase a staggering $1 billion in medical debt. The relief initiative is anticipated to benefit approximately 250,000 residents in Connecticut, with no formal application process required.

“This is not something they did because they were spending too much money; this is something because they got hit with a medical emergency. They should not have to suffer twice – first with the illness, then with the debt. I think it’s really important that people have a sense that they can start building wealth of their own. We’re making that easier for people to do – and the best way to start is [to] eliminate the debt you’ve got,” the governor said.

Medical debt crisis grips America

Several reports from different organizations backed the claims of Lamont and proved that the medical debt crisis is gripping America.

National data from the Centers for Disease Control and Prevention (CDC) in 2021 revealed that 10.8 percent of Americans struggled to pay their medical bills in 2023. A KFF-Peterson Health System Tracker analysis estimated that around 23 million adults or nine percent of the adult population, owed more than $250 in health costs.

“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.

A 2022 report conducted by the Consumer Financial Protection Bureau (CFPB) identified medical debt as the leading cause of bankruptcy in the United States, which impacts around 20 percent of Americans or roughly 66 million people. (Related: National debt hits record-high $32 trillion two weeks after suspension of debt ceiling.)

Moreover, the CFPB discovered that using medical billing information in credit reports is not reliable for predicting future payments compared to traditional credit obligations due to frequent mistakes and inaccuracies. These lapses are made worse by problems like insurance disputes and complicated 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,” said CFPB director Rohit Chopra.

Connecticut set to become first state to wipe out medical debt for eligible residents

Medical debt crisis grips America

More related stories:

RECENT NEWS & ARTICLES