Block grants and per capita caps have been proposed as mechanisms for controlling Medicaid expenditures. Block grants would allocate money to states based on current overall spending levels in each state and per capita caps would allocate funds based on current spending per enrollee. A Brief from the Urban Institute indicates that federal spending varies across states by more than 5 to 1 and spending per enrollee varies on the order of 2 to 1. Generally, disparities will occur because high income states will obtain larger block grants and higher spending per enrollee caps because they spend more today.
The Brief can be accessed at http://www.urban.org/sites/default/files/alfresco/publication-pdfs/2000912-Block-Grants-and-Per-Capita-Caps-the-Problem-of-Funding-Disparities-among-States.pdf.