If someone owns a home but Medicaid (called Medi-Cal in California) pays for that homeowner's long-term care -- in a nursing facility, assisted living facility, or through a community-based program
-- after the person reaches age 55, then Medicaid has a right to be repaid that money out of the value of the house when the homeowner (and a surviving spouse, if there is one) dies. (This applies to money Medicaid spends for long-term care only, not to Medicaid coverage of medical expenses.) Here's how it works.
The whole purpose of Medicaid is to pay for care for people who cannot otherwise afford it. So, the program has strict eligibility rules about how much someone can have in the way of income and assets. Obviously, ownership of a house is a large asset, and if the house were sold or mortgaged, that money could be used to pay for the person's care instead of Medicaid paying for it. But Medicaid rules allow a homeowner to keep the home for as long as he or she lives, and still qualify for Medicaid. What Medicaid does NOT allow is for people to have their cake (Medicaid coverage of long-term care) and eat it, too (pass the full value of their house on to their heirs). Instead, Medicaid can make a claim against the value of the house -- often in form of a lien -- so that when the person receiving Medicaid dies, Medicaid can be repaid the amounts it has paid for that person's long-term care.
This does not necessarily mean that Medicaid will "take" the house from your family. What it does mean is that the family will have to use the value of the house -- by taking out another mortgage on it, or by selling it -- to pay off the Medicaid lien after you die. So, for example, if the house is worth $200,000 and Medicaid paid $50,000 for your long-term care, your family would have to repay that $50,000 out of the value of the house -- by taking out a loan on the house or by selling it -- but the family would get to keep the remaining $150,000.