On April 23, the Urban Institute published a brief examining a method of reducing Medicaid costs as an alternative to converting the program into a block grant.  The brief examines the impact of changing state and federal responsibilities to reduce the ability of states to draw down federal funding at a significantly higher rate than that which they match the federal funding with.  The authors offer a proposal to reduce costs in this manner with what they assert are minimal negative results.

From the report: 

This paper presents an approach that would restructure Medicaid with a form of a swap that would build upon the coverage expansion in the Affordable Care Act, largely eliminate incentives for creative financing, mitigate problems that the recessions cause for the current system, and strengthen incentives for cost containment. The proposal would not have the distributional effects that a straightforward swap proposal would have. The proposal would provide savings by greatly reducing the ability to use "creative financing" and have some effect on reducing spending growth. How much would be saved is uncertain because, as noted, Medicaid expenditures have not grown significantly over and above enrollment growth and inflation, particularly compared with other payers.

Full report: Restructuring Medicaid through a Swap: An Alternative to a Block Grant (PDF | 289.08 KB)

Urban Institute.  (2011).  Restructuring Medicaid through a swap: an alternative to a block grant.  Holahan, J.