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Connecticut Becomes the First State to Cancel $1 Billion of Medical Debt

Connecticut Becomes the First State to Cancel $1 Billion of Medical Debt

Connecticut Gov. Ned Lamont is cancelling up to $1 billion in medical debt for hundreds of thousands of residents this year.

Lamont announced on Friday that Connecticut would be the first state to take action and alleviate the financial stress many residents face when it comes to medical bills.

To understand how this would work, we need to understand a little bit about how medical debt works in America: Around 50 percent of Americans have at least some medical debt, according to the most recent figures. About half of that is owned by collection agencies, who buy up medical debt for pennies on the dollar and then turn collecting it for a profit.

Connecticut’s plans would leverage $6.5 million from the American Rescue Plan Act funds the state has received to wipe out the medical debt held by an estimated 250,000 residents, impacting roughly 7% of the state.

“This is not something they did where they were spending too much money,” Lamont told Good Morning America. “This is because they got hit with a medical emergency, and they should not have to suffer twice: first for the illness, then with the debt.”

To qualify, the household’s medical debt must equal 5% or more of their annual income, or if their annual income is under 400% of the federal poverty line. On average, that’s about $125,000 a year for a family of four.

Nationally, roughly 50% of Americans households have medical debt, owing at least $1,000. In Connecticut, roughly 0ne in 10 residents has medical debt. Lamont said the debt reduction plan would help release the financial burden for struggling families.

“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 eliminate the debt you’ve got.”

Major cities like Philadelphia and New York have also announced plans to eliminate medical debt, but those plans are still in process. One group who has been able to cancel a lot of medical debt already? Churches. Around the country, churches haves gathered resources to pay off the medical debt of millions.

Take St. Bede’s Episcopal Church in Santa Fe, New Mexico, led by Reverend M. Catherine Volland, for example. St. Bede’s collected $15,000 to send to RIP Medical Debt, an organization dedicated to eliminate medical debt for all Americans, which amounted to $1.5 million in medical debt — erasing all the available medical debt not just in Santa Fe, but in the entire state of New Mexico and even some parts of Arizona.

“I see Jesus getting pretty nitty gritty with people. Including their material needs. I’m sure he knew he wasn’t changing the fundamental system of poverty and corrupt taxation and all that he encountered. He didn’t wipe out all prejudice. But he confronted it where he saw it, when he saw it and used the opportunities he was given to respond to that. I think we have an obligation to do the same thing,” Volland said.

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