It sounds like your father-in-law is a good candidate for “spousal refusal” or “just say no.” If your father assigns his legal right for support from his wife over to the state, under the Medicaid rules the state Medicaid agency should evaluate your father-in-law’s financial eligibility for coverage based on his assets and income alone. In theory, the state could then seek contribution from his wife, but this only rarely happens.
For more information about this strategy, go here: https://www.elderlawanswers.com/medicaid-spousal-refusal-just-say-no-12156
A local elder law attorney can tell you how this approach works in your state and help with the process. To find one near you, go here: https://www.elderlawanswers.com/elder-law-attorneys.