While both the per capita matching funds and the block grants seek to unleash innovation, they provide the states with very different incentives, according to Michael Cannon, director of health policy studies at the Cato Institute.
“The current per dollar matching grant system provides an unlimited entitlement to federal funds,” Cannon said. “The per capita matching grant system allows the states to keep that unlimited entitlement to federal funds going if they keep expanding enrollment, and so it creates enormous pressure for states to expand enrollment.”
Because able-bodied adults consume less health care than those who are more vulnerable, the per capita matching grants have an unintended consequence, according to Cannon. They will give states incentives to enroll able-bodied adults in preference to others who are more needy.
Cannon prefers giving the states block grants, which have the benefit of limiting federal expenses to a fixed amount, making the program financially sustainable.
For more, read my Philadelphia Inquirer op-ed, "Fulfill Promise to Repeal ObamaCare."