Gov. Ned Lamont. Credit: Hugh McQuaid / CTNewsJunkie

Gov. Ned Lamont wants to use $20 million in federal COVID-19 recovery funding to contract with a company that buys medical debt.

The idea is that the company would contact hospital and medical providers directly to purchase the debt and negotiate with hospitals to cancel some debt. The holder of the medical debt wouldn’t need to apply for the funding.

Lamont said based on a model used by other governments, it would cancel debt ranging from $25 to six-figure amounts.

“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,” 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.”

Almost two-thirds of personal bankruptcies are caused by medical debt, and by erasing the debt it would put more money back into the economy. According to the U.S. Census Bureau, approximately 19% of American households carry medical debt, and the median amount owed is $2,000. 

Sen. Matt Lesser, D-Middletown, who co-chairs the Insurance and Real Estate Committee, said medical debt is a huge problem and causes people to lose their homes. 

“Even a small amount of money can have a massive impact,” Lesser said. 

However, he said if Connecticut is going down this path, which he welcomes, then they also have to be doing other things such as making sure hospitals are doing their part on forgiving some debt. 

“This can’t just be a handout to the health care industry,” Lesser said. 

He said they also have to look at lowering medical costs and pharmaceutical costs.

“We need to do both. We can’t just do the sugar-high of helping people after the fact. We need to make sure we’re tackling the price of health care and make sure hospitals doing the job they’re supposed to be doing and offering financial assistance.” 

Adam Joseph, a spokesman for Lamont, said this is only one of the governor’s proposals to lower health care costs. Joseph said the rest will be part of the two-year budget he unveils next week. 

Senate Republican Leader Kevin Kelly said while he appreciates the attempt, “this really is a Band-Aid approach.” 

“It will only help a small number of people instead of lowering health insurance premiums and health care costs for everyone in our state,” Kelly added. 

Republicans have been pushing for the state to use $20 million to get a reinsurance waiver from the federal government to help pay the costliest claims and lower everyone’s health insurance premium in the process. 

A study funded by Access Health CT in 2019 found a reinsurance waiver would lower health insurance premiums by 5%. 

Republicans and Democrats alike have been critical of Lamont for not tackling the cost of health care in a way that would substantially change the cost to consumers.