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My 93-year-old dad had a stroke in November of 2016. He is now on Medicaid. We applied for VA benefits in January of 2017. I just noticed that the VA started sending his $700 benefits to his checking account. I also have a special needs sister that lives in my dad's house that receives SSI. This extra money will help pay for house insurance, taxes and upkeep on the house. Do I need to report the VA benefits to Medicaid?

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Servaes VA is correct. If she was not listed as a dependent on the original application you will have to go through the procedure to have this corrected. Contact the person or organization that filed the original application or contact a County Veteran Service Officer for assistance.
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1) If a single veteran is in a Nursing home on Medicaid, the maximum VA PENSION benefit is $90 per month which Medicaid cannot touch.
2) This does not apply to veterans who are married or have a dependent child. If your sister was 100% disabled and unemployable before the age of 18, she should be listed as a child on your father's VA benefit - you will need a statement from her doctor. Once you do this, the funds are not countable by Medicaid for your father and are allocated to his daughter for her care.
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You should report it but...
Check with the VA or a VA commission and determine the level of disability that your Dad has (through the VA) If his disability is service connected he may qualify to live in a VA nursing home. Then there would be no need for Medicaid and his needs would be taken care of through the VA.
Just writing this seems silly you have probably already checked this out but it is a good thing for others to always check with the VA to determine if their loved one qualifies for benefits and to what degree.
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Absolute yes. Check your award letter from Medicaid as to how soon you ate required to.report it. Do it when you are supposed to. There is a database cross match, called PARIS, that flags VA and other states' benefits to avoid duplication.
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Yes!!
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Yes, also, find a lawyer to set up a Special Needs Trust Fund (SNTF), and sign it into your father's will, for your sister. You could be her Trustee. That way your sister can be safe financially from the government. I know this because I'm disabled, too, and my dad is 90. After he pass, everything he own will then go to my SNTF and my brother is the Trustee.
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Someone previously said that you can't receive Aid and Attendance if on Medicaid. Both are government monies.
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Fail to report this money received and you can expect a bill or Property lien later. The SURVIVOR benefits from ANY GOVT PROGRAM or the Rep Payee's income can be offset for agovernment debt.
Report it, let the chips fall where they may.
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A Va pension dies with the patient. Contact the Veterans Administration as you may have to repay any monies misused.
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Medicaid allows an applicant to own very little depending on the state they live in. 
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