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Like a block grant, a per capita cap is a federal strategy to limit federal spending on safety net programs while transferring a greater share of the responsibility and costs to states.
Per capita caps are most frequently suggested as a way to transform Medicaid, the country’s health insurance program for low-income children and families. Under current law, programs like Medicaid are entitlements, funded by a combination of state and federal dollars and available to anyone who is eligible. This makes these programs highly responsive to poverty and economic downturns. If Medicaid shifted from an entitlement to a per capita cap, the federal government would pay a certain amount for medical care per person and require states to make up the remaining cost.
Like a block grant, per capita caps are designed to reduce federal spending over time, leaving states to pick up an increasing level of cost for the program out of their own budgets.
