On application Medicaid does not come out and take anything. You have to go to the Medicaid office. You have to prove you are eligible. You can have exempt assets plus $2,000. That means you must prove you have spent your cash assets down to $2,000.
Since the house is excluded you do not have to get a mortgage or sell it. The contents are exempt too, so you don’t have to have a garage sale. The car exempt so you don’t have to sell it either. All of that is true at the time of your application and receipt of Medicaid benefits. You can keep your exempt assets. But.
On death of the Medicaid recipient, Michigan has Medicaid Estate Recovery. Now the state wants payback. Any property that was excluded or exempt on your application is now a target for the state to take. In Michigan this is done only through probate. There is a moral here: Avoid Probate.
If you avoid probate you will avoid Michigan Medicaid Estate Recovery. But, some common methods to avoid probate run afoul of Medicaid’s eligibility and divestment rules.
Don’t try to do it alone. At the very least have a Certified Elder Law Attorney review your plans and actions before the Medicaid application and if it is too late for that, then do it while the recipient is still alive. There are fixes that can be put in place.