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Person on Medicaid passed away.

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Life insurance benefits are generally exempt from Medicaid estate recovery. Policies with cash value are supposed to be cashed in as part of spend-down. You might need to check on filial responsibility laws, but if you are the beneficiary, you get to keep the proceeds and do not need to report.
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You can have the money placed in a trust
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They can throw your axx in jail for fraud.
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I don't know. You can call them and ask. :)
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What can medicaid do to me if I dont inform them I recieved an ins policy from a deceased person on medicaid
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It depends on who OWNED the policy. If the owner died and was on Medicaid, yes, you better let them know. Now if someone else OWNED it and you were beneficiary, no problem, keep it.
For example my sister is on Medicaid. I own her life insurance policy and I am the beneficiary, so Medicaid will not go after it. It's just enough for a small funeral and burial, which Medicaid would not pay for.
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