The IRS helps with 1099-NEC instead of W2:

https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

Here is the ProConnect Help article:

https://proconnect.intuit.com/community/individual/help/excluding-medicaid-waiver-payments-from-inco...

I'm dealing with that problem, not for someone involved in a Medicare waiver case, but a caregiver for refugees under 18, placed by a licensed foster-care agency.  As much as I dislike playing "trick the IRS computer," I'm considering reporting the 1099-NEC amount on a Schedule C, then deducting it as a Section 131 exclusion.  I don't trust the IRS CP-2000 clerks to recognize anything else.