Connecticut Gov. Ned Lamont proposed the elimination of medical debt for eligible residents, which, if successful, would make the state the first in the country to do so.

The Democratic governor's plan was revealed during an exclusive interview on Friday on "Good Morning America." He said that his state plans to erase roughly $1 billion in medical debt this year by leveraging $6.5 million in American Rescue Plan Act funds.

Eliminating Medical Debt

Lamont said that this was not something that happened to people because they were spending too much money. He argued that it was the result of being hit with a medical emergency that they did not expect and were unable to completely account for. The governor said that they should have to suffer twice, the first with their illness and the second with debt.

Connecticut officials said that they are contracting with a non-profit organization that purchases medical debt and eliminates it at a reduced cost. Residents who have household incomes of up to 400% of the federal poverty line, which is $124,800 annually for a family of four, or whose medical debt equates to 5% or more of their annual income will be eligible for the program, as per ABC News.

The state added that there are roughly 250,000 residents who can expect to see their medical debt erased with the initial $6.5 million investment. The governor noted that it is important that people have a sense that they can start building wealth of their own. He added that they are making it easier for people to do just that and eliminating debt is the best way to start.

Furthermore, eligible households will not have to apply to the program because the contracted agency will work with state agencies to automatically wipe their debts clear. The state noted that the relief should go into effect by June this year.

Authorities said that more than one in 10 Connecticut residents have medical debt in collections. Based on a recent Consumer Financial Protection Bureau report, it was shown that medical debt is the leading source of collections debt for Americans. It is greater than credit cards, personal loans, utilities, and phone bills combined.

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Helping Residents Build Wealth

Lamont said that the effort would liberate many residents from what he called "the cloud" over their heads. The governor added that it would give them more freedom to buy a home, start a business, or continue with their education, according to CNN.

The situation comes as Connecticut joins a growing number of governments that are working to wipe out residents' unpaid medical bills. New Jersey previously included $10 million in its most recent budget to fund a pilot program that would cancel people's medical debt.

Last month, New Jersey Gov. Phil Murphy called on the state Legislature to expand the effort in the coming budget. During his State of the State address, he said that for every dollar invested, they could retire up to $100 in debt for tens of thousands of residents.

Once the vendor is secured for Connecticut's latest program, it would sign an agreement with hospitals to analyze and acquire large portfolios of debt that meet eligibility criteria. Residents should then start receiving letters in the mail notifying them that their debt has been canceled, said NBC Connecticut.

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