I suspect that you are asking about ‘difficulty of care’ payments. Per IRS Notice 2014-7, payments from a state Medicaid Home and Community-Based Services program are specifically excluded from gross income for income tax purposes.
IRS Notice 2014-7 can be found at this link. Click on the hyperlink Notice 2014-7 in the center of the page.
The TurboTax Help below explains how the income is reported then reversed by making two entries on the IRS 1040 tax return.
Make the entries under Federal / Income & expenses / Your Income and expenses / Less common income as outlined in this TurboTax Help.
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