Connecticut becomes 1st state to cancel medical debt for eligible residents
The state plans to invest $6.5 million in funds from the 2021 American Rescue Plan Act toward a partnership with nonprofit RIP Medical Debt, which buys bundled medical debt portfolios from providers.
Although the details have yet to be ironed out, Connecticut plans to forgive medical debt for residents during the first half of 2024. Gov. Ned Lamont recently announced the initiative on ABC’s Good Morning America.
“I think it’s really important that people have a sense that they can start building wealth of their own,” he said. “We’re making that easier for people to do. And the best way to start is to eliminate the debt you’ve got.”
The state plans to cancel $1 billion in medical debt by investing $6.5 million in funds from the 2021 American Rescue Plan Act toward a partnership with RIP Medical Debt to abolish approximately $650 million in medical debt for eligible state residents. For every $100 invested, RIP Medical Debt abolishes $10,000 of debt.
Connecticut residents would be eligible if their medical debt equals 5% or more of their annual income or if their household income is less than 400% of the federal poverty line. Residents affected by the initiative simply will be notified that their medical debt is eliminated. A contract has not been finalized, and a timeline for implementation has not been announced.
The announcement builds on a growing national movement that began several years ago in Cook County, Ill. Last month, New York City announced a program with RIP Medical Debt to clear more than $2 billion in debt for up to 500,000 residents, Several other local governments are taking action, including Akron, Cleveland and Toledo, Ohio; New Orleans; Wayne County, Mich.; and Washington, D.C. RIP Medical Debt currently is in talks with 30 additional municipalities and states, including New Jersey and Michigan.
The Biden administration also is working to help relieve the burden of medical debt. Last fall, it outlined plans to develop federal rules barring unpaid medical bills from affecting patients’ credit scores. The regulations, if enacted, potentially would help tens of millions of people who have medical debt on their credit reports, eliminating information that can depress consumers’ scores and make it harder for many to get a job, rent an apartment or secure a car loan.
Related: New York joins other cities, wiping out $2 billion in medical debt for 500k patients
Medical debt is a widespread challenge for both uninsured and insured adults in the United States, with about 41% holding debt caused by their medical or dental bills, according to 2022 data from KFF.