IMO that person does not have taxable income at the time of what you call his deemed payment because of the general welfare exclusion, not so much because it's a loan.
I think it depends. If this lien situation creates some type of repayment obligation, and hence, indebtedness, then I can see it as Doug sees it – a payment was made with borrowed funds. If this lien situation does not create any type of repayment obligation, then the receipt of the benefit would be tax free under the GWE. If there is a future repayment in this latter case, it wouldn’t be made with tax-exempt income. The funds would have to come from another source, as the funds tied to the GWE already went to the nursing home (directly from Medicaid).
I think the issue you raise would arise if the guy has no repayment obligation such that the GWE is invoked, but then he tries to deduct the payment that Medicaid made to the nursing home. That would be a deduction funded by tax-exempt income.