The American Enterprise Institute recently published a thought-provoking and helpfully brief primer on how Medicaid funding works, what it means to shift to state block grants, and why politically such a move will be tremendously challenging.
Alas, something much more radical would actually give the poor better access and would drive the competition in the marketplace that would start to incent health care delivery systems and insurers to compete for their dollars. To wit, why not simply focus on an individual income basis and fund catastrophic insurance for unexpected events (what insurance is designed to do in every other industry save healthcare) complemented with funding for a flexible with annual rollover features Health Savings Account? This seems to me to be the ultimate path out of Medicaid and all of its challenges, such as those raised in this post. It would provide purchasing power directly to individuals, get them out of narrow networks defined by states, and remove the massive costs of administering programs through federal and state bureaucracies.