Whether the reform uses a block grant approach, or a “per capita” matching funding approach, the method chosen must get rid of the current method of determining the federal subsidy amount.
Currently the Medicaid funding method allows states that do not control their own health care costs, and in particular their “per capita” Medicaid costs, to get their more costly state medicaid plans subsidized by the other states. It pays a federal dollar (at least) for every state dollar.
It should not.
The “federal dollar” - whether in block grants or “per capita” spending sums - should be weighed against a national median - smack between the highest and lowest cost states, and it should be no more than that federal median; forcing liberal states to absorb the extra costs of their own more expensive and more extensive Medicaid plans. They then have mandatory budgetary needs to control those plans better.
And yes, states should be allowed to set their own deductibles and co-pays. That will feed into the use of national median cost as a standard by lowering it.