You may want to be cautious how to enter this in light of Feigh vs. Commissioner (152 TC N. 15 from May 2019). 

The Feigh decision means that clients receiving Medicaid Waiver payments (also called Difficulty of Care payments) may not only exclude the payments from gross income, but may CHOOSE to include it as earned income for the earned income credit and child tax credit.  If you simply subtract the Medicaid Waiver Payment as an expense on the Schedule C (subject to Notice 2014-7), then there will be no earned income.

So, if your client chooses, they will report the income on Schedule C and pay self-employment taxes on it.  Then as "Other Income" will be a negative amount of the payments with the comment "Notice 2014-7).  The Other Income line will remove it from gross income, but it will stay as earned income.

Clients may also choose to exclude from both gross income and earned income - in which case reporting it as an expense on Schedule C works.

But as others pointed out, to allow the exclusion from gross income subject to Notice 2014-7, the caregiver and their "patient" must reside in the same house.