Medicaid and 401k. Does the 401k make him ineligible for Medicaid?

Your father's estate pays for the lawyer. The 401K is an asset of your father, yes. And should be used for his care. He won't receive medicaid in all likelihood until it is gone. You, as POA, may have to move this 401K in total into accessible accounts. So the 17,000 does need to be used for your Dad and his Care and the Lawyer's advice is a part of that. How is this 401K invested? If in a bank it will be easier with a good POA. If in investments I have ZERO idea how that will go. Your father has no income other than his holding of this 401K and his Social Security, then the tax bite will not be bad at all I would think. But again, asking a Forum is getting you our opinion, not expert advice, and expert advice is what you require, and yes, when in the hands of docs and lawyers it comes at quite a cost.

Also, that $400/hr should come out of dad's assets, not yours.

You need to call your County Medicaid office. That 17,000 may need to be spent down to the cap allowed by Medicaid. My state ids 2k. That may pay for 2 months private pay and that would give you time to apply for Medicaid and have it start when his money ran out.