Here are the FACTS:
1. The treatment you base everything on DOES NOT EXIST.
2. It is highly improbable that there are one million Medicaid patients with cancer (feel free to offer proof of this if you want to go down this road).
I am curious though, why did you choose Medicaid? This program is mainly run by the individual states and that is where much of the funding comes from.
Your illustration simply doesn't work; however, it does demonstrate the liberal/libertarian mindset of supporting death panels based on a problem that doesn't actually exist.
If a new and expensive treatment comes along, which was not contemplated in the program's budget, the choices are still (1) don't cover it, (2) cover it selectively, or (3) raise taxes to pay for it.
If you believe that the nation's taxpayers have a duty to accept (3), that's a valid argument. But you should say so.