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February 2, 2023

Lamont unveils $20M plan to cut medical debt for CT residents

RYAN CARON KING / CONNECTICUT PUBLIC RADIO Gov. Ned Lamont addressing the Connecticut legislature.
By Andrew Larson

Gov. Ned Lamont on Thursday announced that he is proposing to significantly reduce overdue medical debts for thousands in Connecticut through a $20 million partnership with a nonprofit organization.

Lamont wants to allocate $20 million in funding the state received from the American Rescue Plan to contract with a nonprofit that buys medical debt, and eliminates it at a fraction of the original cost, according to the proposal.

The concept is based on a model that other governments in the U.S. have used, he said.

The nonprofit would contact hospitals and healthcare systems directly, purchase portfolios of debt owed by patients, and negotiate down the cost.

“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,” Lamont said.

Two-thirds of personal bankruptcies are caused by medical debt, he said. According to the U.S. Census Bureau, about 19% of U.S. households carry medical debt, with the median amount being $2,000.

The Lamont administration estimates that the $20 million investment could eliminate $2 billion in medical debt for Connecticut residents. Hospitals often sell medical debt for pennies on the dollar, he said.

The investment will be included in Lamont’s FY 2024-25 state budget proposal, which he will present to the General Assembly next week.

The IRS does not count medical debt canceled via nonprofits as taxable income.
 

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