It sounds like the veteran was receving 10% disability from the VA (the $127, which should be $133.34 for 2016). Once he started receiving Aid & Attendance the $127 would stop and he would just receive the Non-Service Connected Pension as it is the greater benefit and you cannot receive both concurrently. The health provider was correct in saying "the rest" of the A&A benefits as he is not receiving the maximum benefit under A&A (that is $1788.00 per month, for a single veteran w/ no dependents). Does Medicaid cover all of his medical expenses? The VA Non-Service Connected Pension is income and medical expense based so a change in those expenses would be a change in income for VA purposes. I would recommend that you find a Veteran Service Officer (VSO) to sit down with to figure everything out as I do not want the veteran to lose benefits or owe the VA any money. You can locate a VSO in your state via the VA's website here: OGC - Accreditation Search
If you have any other questions please feel free to follow up and I will assist you the best that I can.