Lamont: Wipe Out Medical Debt For CT Residents

News release from Governor Lamont:

Governor Ned Lamont today held a news conference in Hartford to announce a proposal he will introduce during the 2023 legislative session that will cancel overdue medical debts for thousands of Connecticut residents who are struggling to pay their bills.

Based on a model that other governments throughout the United States have used recently, the governor’s proposal calls for the state to invest $20 million in federal COVID-19 recovery funding it received from the American Rescue Plan Act and use those dollars to contract with a nonprofit organization that buys medical debt and eliminates it at a fraction of the original cost. The nonprofit will contact local hospitals and hospital systems directly, purchase entire portfolios of debt owed by eligible households, and negotiate with the hospitals to cancel that debt. There is no application process for eligible households to have their debt canceled. In other jurisdictions that have pursued this strategy, the amount of medical debt canceled for households has ranged from $25 to six-figure amounts. Two-thirds of personal bankruptcies are caused by medical debt.

One nonprofit working under this model states that they have been able to generate more than a one-to-100 return on investment of government dollars. This is because hospitals often sell medical debt for pennies on the dollar.

The Lamont administration estimates that this $20 million investment has the potential to eliminate about $2 billion in medical debt for Connecticut residents–an astounding amount of financial relief for a relatively small investment. The investment will be included as a component of Governor Lamont’s fiscal years 2024 and 2025 biennial state budget proposal, which he will present to the General Assembly next week.

“Several state and local governments have seen significant success at canceling medical debt for their residents using this model, and I think this is absolutely the right way to use this COVID-recovery funding,” Governor Lamont said. “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. This debt erasure will put millions of dollars back into the Connecticut economy and provide an economic stimulus to local communities.”

According to the U.S. Census Bureau, approximately 19% of American households carry medical debt, and the median amount owed is $2,000. 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. About 31% of households with a member in fair or poor health have medical debt, compared to 14.4% of those with no members in fair or poor health. 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 of disabilities.

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.

To reduce the chances of medical debt building up again, Governor Lamont is encouraging Connecticut residents to take advantage of a number of no-to-low cost insurance options through qualified health plans under Access Health CT and will seek legislative support for a number of transparency and affordability initiatives. The ultimate solution to this problem is 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. The governor has called on all parties–including insurers, employers, providers, and consumers–to step up and be part of the solution.

Governor Lamont is scheduled to deliver his annual budget address to the General Assembly on Wednesday, February 8, 2023, at 12:00 p.m. Documents containing the full details of his state budget proposal will be released at that time.