Those block grants replaced the old federal matching funding formula with fixed finite funding that left the states responsible for 100% of increased spending, but gaining 100% from any savings.
Ideally this would be done by reforming Medicaid financing to provide the federal assistance to the states for the program through fixed, finite block grants, which do not vary by matching increased state Medicaid spending as under the current system.
The key to the 1996 reforms was that the block grants to each state were finite, not matching, so the federal funding did not vary with the amount the state spent.
The simplest way for the federal government to restrain Medicaid would be to end the current system of matching state spending and replace this with block grants, which would give the states an incentive to focus on cost-control.
Federal programs with matching funds to states (e.g. transit, Medicaid) should be eliminated or restructured as block grants as was done successfully with Welfare.