Connecticut will cancel about $650 million in medical debt for around 250,000 residents this year, becoming the first state to provide this type of relief, Governor Ned Lamont announced on Friday (2).
The effort will free many residents from a “cloud” over their heads, granting them the freedom to buy a home, start a business, or continue their education, Lamont told CNN. This will help them strengthen their financial situation in a state with a significant wealth disparity.
Residents whose medical debt is equal to 5% or more of their annual income or whose household income is up to 400% of the federal poverty line, or about $125,000 in 2024, are eligible.
Those who qualify do not need to apply – they will receive letters in the mail informing them that their debt has been forgiven this summer. More than 1 in 10 residents of Connecticut have medical debt.
Connecticut joins a growing number of governments that are eliminating unpaid medical bills for their residents. New York City announced last month that it would wipe out more than $2 billion in medical debt for up to 500,000 residents over the next three years.
The exact amount owed by Americans is difficult to determine, but an analysis by KFF of 2020 Census Bureau data found that U.S. adults have at least $195 billion in medical debt.
Nearly 1 in 10 American adults has medical debt over $250, with Black Americans and middle-aged residents being more likely to be in this situation, according to KFF. A separate analysis conducted last year by Third Way, a center-left think tank, concluded that the middle class is the most affected by unpaid healthcare bills.
Medical debt is now the largest source of debt in collections, totaling more than credit cards, utilities, and auto loans combined, according to the White House.
The three largest credit reporting agencies announced in 2022 that they would remove nearly 70% of medical debt from consumer credit reports. The Consumer Financial Protection Bureau and the Biden administration are also considering ways to lessen the burden of medical debt.
Source: CNN