A block grant is a grant-in-aid of a specified amount from a larger government to a smaller regional government body. Block grants have less oversight from the larger government and provide flexibility to each subsidiary government body in terms of designing and implementing programs. Block grants, categorical grants, and general revenue sharing are three types of federal government grants-in-aid programs.

The figure demonstrates the impact of an education block grant on a town's budget constraint. According to microeconomic theory, the grant shifts the town's budget constraint outwards, enabling the town to spend more on both education and other goods, due to the income effect. While this increases the town's utility, it does not maximize the town's spending on education. Therefore, if the goal of a grant program is to encourage spending on a particular good, a categorical grant may be more effective in achieving this goal than a block grant, as most block grant critics would argue.

A block grant in the United States is a grant-in-aid of a specified amount from the federal government of the United States to individual states and local governments to help support various broad purpose programs, such as law enforcement, social services, public health, and community development.

Through a block grant program for Medicaid, for example, each state would receive a set amount of money from the federal government. The block grants can be set based on "per capita" or on the needs of the state. Each state has to fill any funding gap if there is a difference between their spending and the amount set by the federal government.

Block grants are the topic of debate in the United States. According to the 2014 Congressional Research Service (CRS) advocates, who would like to see Medicaid converted into a block grant, say that block grants assist in reducing the federal deficit, increase government efficiency, redistribute power, improve accountability, and allow for flexibility. Critics, who are specifically against converting Medicaid into block grants, say that block grant "undermine the achievement of national objectives", "reduce government spending on domestic issues" where, for example, the "most vulnerable seniors, individuals with disabilities, and low-income children" would lose their health care through deep cuts in Medicaid. Critics also say that because block grants are decentralized, it is more challenging to "measure block grant performance and to hold state and local government officials accountable for their decisions".

In February 2017, the national debate in the United States regarding the effectiveness of block grants intensified as the United States Congress decided whether to convert Medicaid to a block grant program.

According to a January 11, 2019 Politico article, the Trump Administration was creating new guidelines to overhaul Medicaid in order to reduce health care costs for the poor through block grants, bypassing Congress. According to the same article, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma had mentioned using CMS' authority to "pursue block grants during a meeting with state Medicaid directors in the fall" of 2018. Verma promotes block grants but she has "faced heavy scrutiny" from CMS lawyers in her attempts to "insert block grant language into federal guidance."

The 2014 Congressional Research Service (CRS) report says the first true block grant was in 1966. In 1949, first Hoover Commission's 1949 report recommended the creation of "a system of grants" based "upon broad categories—such as highways, education, public assistance, and public health—as contrasted with the present system of extensive fragmentation." The Eisenhower Administration (1953–1961) created "block grants in the health and public welfare fields". In the 1950s, the U.S. Department of Health, Education, and Welfare (HEW) was able to consolidate "child health and welfare, vocational education, and vocational rehabilitation areas" into block grants for public health. But most proposals for block grants repeatedly met rejection in the 1950s. Reasons included a political misalignment between federal and state levels, concerns about a lack or reduction of federal controls, and that giving states wider latitude in spending would be a "more effective and efficient use of public funds."