No to both federal and CA.

If your client received Form W-2, complete Screen 10, then go to Screen 14.1 "SS Benefits, Alimony, Miscellaneous Inc." and enter the amount on the line "Nontaxable medicaid waiver payments to care provider that were incorrectly reported on W-2 Box 1."  Press F1 key for more information.

If your client did not receive Form W-2, consider entering the nontaxable amount on the line "Nontaxable medicaid waiver payments to care provider that were not reported on W-2 Box 1."  Press F1 key for more information.