by Christian Wade
Connecticut Gov. Ned Lamont is pitching a plan to tap into federal pandemic relief funds to “erase” an estimated $2 billion in medical debt owed by the state’s residents.
The plan, which will be included in Lamont’s preliminary two-year budget proposal to be unveiled next week, calls for using $20 million in American Rescue Plan Act funds to hire a nonprofit organization that buys medical debt and eliminates it “at a fraction” of the original cost.
Under the proposal, the nonprofit would contact local hospitals and health care systems directly, purchase portfolios of debt owed by eligible households, and negotiate with the hospitals to cancel that debt.
Lamont said the move will help Connecticut residents erase debts that have had a “significant emotional toll” on those who can’t pay it off, including people with “significant” medical issues.
“This debt erasure will put millions of dollars back into the Connecticut economy and provide an economic stimulus to local communities,” he said in a statement.
He said the proposal was modeled on a similar one that has been used by New York City, Chicago and other jurisdictions to reduce or totally eliminate medical debt.
Lamont said residents who have their medical debt canceled under the plan won’t have to pay more taxes on the payoffs, because the Internal Revenue Service doesn’t count medical debt canceled by nonprofits as taxable income.
Nationally, an estimated 19% of American households have medical debt, with a median of $2,000 owed, according to data from the U.S. Census Bureau.
Medical debt disproportionately impacts Black and Latino families – 27.9% of Black families and 21.7% of Latino families have medical debt, compared to only 17.2% of White households, the data shows.
More than one in four households with at least one member with a disability have medical debt, compared to 14.4% of households with no members with disabilities. About 31% of households with a member in poor health have medical debt, compared to 14.4% of those with family members in good health, according to Census data.
Nearly 60% of all debt held by collection agencies is medical debt owed by some 43 million households, according to the Consumer Financial Protection Bureau.
To prevent more medical debt from accumulating, Lamont said the state will need to drive down the “unsustainably high costs of medical care, ensure universal access to primary and preventative care, and make sure health care coverage is affordable and easy to access.”
Lamont is scheduled to deliver his annual budget address to the General Assembly Wednesday.
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Christian Wade is a contributor to The Center Square.
