What may be spent by Medicaid recipient out of her personal checking account?

Check with your state Medicaid people. I believe she can do what she wants with the money, as long as it is not more than they allow her to have. I would, however, make sure there are good records, just in case. But please do check locally, as states vary as far as the rules go. You don't want to be worried about repercussions down the road.
Good luck,
Carol