Deductions & credits

Since the income is not reported on your W-2 form in box 1, you don't need to enter the W-2 form in TurboTax. You can add the income however if you need it for earned income or other purposes as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Income not already reported on a W-2 form

5. Say "yes" to the question regarding receiving non-taxable Medicaid waiver payments:

6. Work through the section and enter your non-taxable health care payments and they will show as non-taxable on your tax return: