Connecticut Gov. Ned Lamont (D) announced Friday a first-in-the-nation plan for the state to cancel medical debt for eligible residents.

The state plans to use $6.5 million in American Rescue Plan funds to eliminate approximately $1 billion in medical debt for Connecticut residents.

“This is an important priority for our administration and will provide financial and emotional relief to thousands of Connecticut families,” the governor said on X Friday morning.

A recent Consumer Financial Protection Bureau report found that medical debt accounts for more than 50% of debt in collections nationwide, exceeding credit card, personal loan, utility, and phone bills combined.

Connecticut is planning to contract with a nonprofit group that buys medical debt at reduced costs, erasing the medical debt of approximately 250,000 residents.

Residents are eligible for relief if their household income is up to 400% of the federal poverty line, which is $156,000 for a family of four, or their medical debt is 5% or more of their annual income.

Eligible residents will not have to apply for the program because the contracted agency will work with the state to wipe out the debt automatically.

Debt relief is expected to take full effect by June.

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New York City Mayor Eric Adams released a plan earlier this week to erase $2 billion in medical debt through a similar program, spending only $18 million in taxpayer funds to pay the debts of more than 500,000 residents.

According to the White House, several other municipalities have acted on plans to use a combined total of $16 million to purchase and wipe out nearly $1.5 billion in unpaid medical expenses.