Connecticut to cancel medical debt for thousands statewide: governor's office

Connecticut will become the first state to implement a plan that would cancel medical debt for thousands of people statewide under a state law, according to the governor’s office.

A law that was signed last year is expected to be implemented this year and cancel about $650 million in medical debt, which is expected to wipe out the debt of around 250,000 people, the governor’s office said.

It was a year ago today that Gov. Ned Lamont announced a plan to cancel overdue medical debts for thousands of residents.

That proposal included using $20 million in federal COVID-19 recovery funds the state received from the American Rescue Plan Act.

The legislation was not included in the Appropriations Committee’s proposed budget, but the governor announced in June that there was a budget agreement with legislative leaders that included using $6.5 million in American Rescue Plan funds to erase hundreds of millions of dollars in medical debt that his office said disproportionately impacts Black and Latino families.

The governor’s office said more than 1 in 10 Connecticut residents has medical debt in collections and the state will be the first to cancel medical debt statewide under a state law.  

How it works:

The state is using the $6.5 million to contract with a nonprofit organization that buys medical debt from hospitals and eliminates it at a fraction of the cost.

The governor’s office said this is a one-time elimination that residents are eligible for it their household income is up to 400% of the federal poverty line  -- $124,800 for a family of four -- or if their medical debt is 5% or more of their annual income.

There is no application process for households that are eligible to have their debt canceled.

The vendor, once it is secured, will sign an agreement with hospitals to analyze and acquire large portfolios of debt that meet eligibility criteria.

Then residents should receive letters in the mail saying their debt has been cancelled.

They could go out as early as this summer but will be sent by the end of the year, according to the governor’s office.