First I want to tell you how sorry I am for your loss.
Losing your husband means that you also lost his income, so by reporting his death, you are also letting the insurance company, medicaid, etc know that your income has decreased, which means that you may be eligible for more help, so yes, you should report your spouse's death.
You asked about opting out of medicaid, and yes, you can.Please see below:
However, before you opt out of medicaid, you may want to look over this:
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