Who Gets Paid First When a Medicaid Recipient Dies -- the Mortgage Holder or the State?

In the settlement of Medicaid claims following the death of a nursing home resident, which debt is considered the superior or higher priority debt? After the sale of a home with an outstanding mortgage, the bank holding the mortgage is supposed to be paid before any other creditors or beneficiaries. But if debts due the state to repay a Medicaid lien are top priority, does the bank loose its status as the superior creditor?

The bank comes first. The mortgage is secured, and the property cannot be sold without paying the mortgage off. The state is paid after anyone whose secured position comes before the state. This can be the bank or other lienholder.