This report from the Center on Budget and Policy Priorities discusses the effects that converting Medicaid funding to a block grant would have on states. Though some think that receiving these fund in the form of a block grant may allow the states to better plan, the report concludes that states would likely be responsible for additional costs.

From the report: 

Some states may mistakenly believe that proposals to convert Medicaid into a block grant or otherwise cap federal funding would make their Medicaid costs more predictable and stable over time. In reality, a block grant is intended to provide predictability for the federal government by replacing the current financing system, under which the federal government pays a fixed share of a state’s Medicaid costs, with one in which the federal government would pay only a fixed dollar amount and leave the state responsible for all remaining costs. This is a radical change that would significantly shift both financial risks and costs to the states.

If federal funding proved inadequate under a block grant or cap, states would have to contribute more of their own funds or else cut back Medicaid eligibility, benefits, and provider payments. That is an almost inevitable outcome, since federal policymakers who favor a block grant seek to use the conversion of Medicaid to a block grant to secure tens or hundreds of billions of dollars in savings for the federal government. The only way for a block grant to produce those savings is for it to provide states with far less federal funding than they would receive under the current system.

Full Report: Medicaid Block Grant Would Shift Financial Risks and Costs to States (PDF | 212 KB) 

Center on Budget and Policy Priorities. (2011). Medicaid block grant would shift financial risks and costs to states. Park, E. and Broaddus, M.