Connecticut Gov. Ned Lamont (D) unveiled a plan Friday to cancel medical debt for residents of the Constitution State in what would be a first-of-its-kind initiative.
The plan was first unveiled on ABC’s “Good Morning America.” According to ABC, the plan includes using $6.5 million in funds from the American Rescue Plan Act to cancel $1 billion of medical debt in collaboration with a nonprofit that buys and eliminates debt.
Those who are eligible for the cancellation include families that have debt equivalent to 5 percent or higher of their annual income.
“This is not something they did because they were spending too much money. This is something because they got hit with a medical emergency,” Lamont said of those struggling with medical debt. “They should not have to suffer twice — first with the illness, then with the debt.”
About 250,000 Connecticut residents are expected to have their medical debt erased, according to state officials.
“I think it’s really important that people have a sense that they can start building wealth of their own,” Lamont said. “We’re making that easier for people to do — and the best way to start is eliminate the debt you’ve got.”
The Biden-Harris administration announced in September that it had started to look into getting rid of medical debt from consumer credit reports to try to ease the effect surprise medical costs can have on people.
The Consumer Financial Protection Bureau (CFPB) said in a press release at the time that the proposal would assist in stopping “debt collectors from coercing people into paying bills they may not even owe, and ensure that creditors are not relying on data that is often plagued with inaccuracies and mistakes.”
The CFPB found in a 2022 report that medical debt is the most common collection type.
“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,” CFPB Director Rohit Chopra said.