Medical Debt To Be Wiped Out for 250,000 People

Medical debt will be canceled for around 250,000 people in Connecticut, the first state in the U.S. to do so.

The New England state is planning to erase approximately $1 billion in medical debt this year by using American Rescue Plan Act funds.

Speaking on Good Morning America, Democrat Governor Ned Lamont said that people struggling with medical debt "should not have to suffer twice: first with the illness, then with the debt."

"I think it is really important that people have a sense that they can start building wealth of their own and making that easier for people to do," he continued. "And the best way to start: eliminate the debt you got." Newsweek has contacted Ned Lamont for comment via the contact form on his website.

According to Good Morning America, eligible residents will start to see changes taking effect in June this year. While a full criteria has not yet been released, the report indicates that single parents and lower income residents in Connecticut will be eligible for having their medical debts wiped.

Funds will come from a $6.5 million fund from the 2021 American Rescue Plan Act, which was brought in to help the U.S. battle through and recover from the coronavirus pandemic.

Working with a non-profit that "buys and eliminates debt" and a fraction of the regular cost, it is estimated around $1 billion in medical fees will no longer need to be paid by the debt-holding households.

Lamont said in a press release issued in February 2023 that "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."

It continues: "This debt erasure will put millions of dollars back into the Connecticut economy and provide an economic stimulus to local communities."

The release cites data from the U.S. Census Bureau which estimates that 19 percent of American households currently have medical debt, and the median amount owed is $2,000.

Medical debt also disproportionally affects minorities, with "27.9 percent of Black families and 21.7 percent of Latino families have medical debt, compared to only 17.2 percent of white households," as per the U.S. Census Bureau.

The release also outlines that "individuals who have their medical debt canceled under Governor Lamont's proposal will not experience any financial tax burden associated with this assistance because the IRS does not count medical debt canceled via nonprofits as taxable income."