A massive deal to wipe out $30 billion in medical debt for an estimated 20 million Americans is providing some relief in Connecticut.
New-York based Undue Medical Debt recently announced it eliminated $219 million in medical debt in Connecticut as part of a deal with Pendrick Capital Partners, a third-party debt buyer.
The debt was owed by people living at or below 400% of the federal poverty level or for whom medical debt was 5% or more of their annual income.
Had the deal not been reached, the debts would have been sold to a for-profit collection agency and patients would have been pursued for the outstanding balances and potentially placed on payment plans.
“Most of that debt was in Florida and Texas, who have not expanded Medicaid,” said Allison Sesso, Undue’s president and CEO.
While Medicaid expansions have protected Connecticut patients from medical expenses, the state is not immune to rising health care costs.
Connecticut lawmakers dedicated $6.5 million in federal American Rescue Plan Act funds last year to partner with Undue to buy medical debt for pennies on the dollar. In December, the state worked with the group to erase an additional $30 million of medical debt for patients. Connecticut aims to erase $650 million in medical debt for residents by 2026.
In addition to state governments, Undue is funded by philanthropist MacKenzie Scott.
Sixty percent of the medical debt relief in the $30 billion deal goes toward non-Medicaid expansion states. The average amount erased was $1,100 per patient, with Texas, Florida, California (expanded Medicaid), Georgia and Oklahoma (expanded Medicaid) having the highest amounts of medical debt.
Local solutions to a national problem
Nearly 1 in 12 adults in the U.S. owe medical debt, according to KFF.
An estimated 280,000 people in Connecticut reported having medical debt in a given year, according to Peterson-KFF. A KFF poll shows people with medical debt reported cutting back on food, clothing, and other household items, and took on additional debts.
“Medical debt is not the result of poor financial decisions – it is the result of a health care system where many families are just one accident or one bad diagnosis away from ruined credit and all that comes with it,” said Sen. Matt Lesser (D-Middletown), co-chair of the Human Services Committee.
In 2024, Lesser helped to pass legislation to ban credit reporting on medical debt. The bill seeks to help patients apprehensive about seeking medical care out of fear of acquiring debt.
Connecticut was “one of the nine states that has banned credit reporting of medical debt, so you should pat yourselves on the back for that,” Sesso said.
“There's also been some discussion about financial assistance policies for patients, and you should continue to go down that path,” Sesso said.
Senate Bill 1192 would require the Office of the Healthcare Advocate (OHA) to develop an online hospital financial assistance portal for patients and family members. Senate Bill 1469 seeks to protect spouses from inheriting medical debt from their partners.
