Is Medicaid going to take my aunts car after her death?

Medicare doesn't take assets for reimbursements. Medicaid does. You would need to check over the paperwork if your Aunt had, in fact, signed up to have Medicaid help pay for her care. It depends on how your State handles vehicles, as each State is different. Since the State did send her a form, then Medicaid is questioning the car.

Don't forget, the taxpayers are funding Medicaid, along with funds from the Federal government.