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Dunno about NY, but in VA and IL, absolutely.
Call Medicaid and work it down. Typically no it’s not protected but they don’t always enforce it.
Medicaid will sometimes negotiate down - In a situation like this where the client would be left with nothing, they should negotiate. I have seen them do 1/3 split (1/3 to Medicaid, 1/3 to attorney, 1/3 to client)