18 NYCRR 360-7.5 Reimbursement Limited to Eligibility Errors/Delays—No Repayment for Post-CBIC Out-of-Pocket Home Care Caused by Provider Shortages

1. Introduction

Matter of Tomei v McDonald (Appellate Division, Third Department) addresses whether a Medicaid recipient may obtain reimbursement for personal care services purchased privately (from a non-Medicaid-enrolled agency) after the recipient was already enrolled in Medicaid and possessed a Common Benefit Identification Card (CBIC), where the local district could not locate an available Medicaid-participating aide during a COVID-19-related workforce shortage.

The petitioner, Marion Tomei, was a Medicaid recipient issued a CBIC in October 2020. After hospitalization and discharge from a skilled nursing facility, her daughter sought immediate 24-hour live-in home care in July 2021 through Nassau County’s Medicaid personal care framework. Although the County authorized services promptly, the petitioner’s family was unable to secure a Medicaid-enrolled provider (first under CDPAP, then while awaiting PCA implementation) and paid $14,220 out of pocket to a private, non-enrolled agency from July through September 2021. The County denied reimbursement under 18 NYCRR 360-7.5, and the Commissioner of Health affirmed at fair hearing.

The core legal issue was one of regulatory scope: whether 18 NYCRR 360-7.5 permits reimbursement when the “error or delay” is not in the Medicaid eligibility determination, but in the practical ability to deliver already-authorized services due to provider unavailability.

2. Summary of the Opinion

The Third Department confirmed the administrative determination and dismissed the petition. The court held that the “error and delay” reimbursement provisions in 18 NYCRR 360-7.5 are tied to errors or delays in eligibility determinations (or reversals of such determinations, including service-level/duration determinations), not to delays or failures in the delivery of authorized services caused by the unavailability of Medicaid-enrolled providers.

The court afforded deference to the agency’s interpretation because it was rational and consistent with the regulation’s plain language. It rejected reliance on DOH Administrative Directive 10 OHIP/ADM-9 to expand reimbursement beyond the regulation, and it found that neither cited case law nor fair-hearing decisions established a contrary binding practice that would render the agency action arbitrary.

Procedurally, the court noted Supreme Court should not have transferred the proceeding under CPLR 7804(g) because the dispute was regulatory interpretation, not substantial evidence; nevertheless, the Appellate Division retained jurisdiction for judicial economy and decided the merits.

3. Analysis

3.1 Precedents Cited

  • Matter of Rovinsky v Zucker, 167 AD3d 122 (3d Dept 2018)
    Used in two ways: (1) to support retaining jurisdiction despite an arguably improper transfer; and (2) to reaffirm that when an administrative directive conflicts with a duly promulgated regulation, “the regulation prevails.” This case supplied the doctrinal tool the court used to discount petitioner’s reliance on DOH Administrative Directive 10 OHIP/ADM-9.
  • Matter of Developmental Disabilities Inst., Inc. v New York State Off. for People with Dev. Disabilities, 214 AD3d 1101 (3d Dept 2023)
    Provided the deference framework: courts generally defer to an agency’s rational interpretation of its own regulation unless it conflicts with the text’s plain meaning. It underwrote the court’s willingness to uphold the Commissioner’s construction of 18 NYCRR 360-7.5.
  • Andryeyeva v New York Health Care, Inc., 33 NY3d 152 (2019)
    Cited for the rationale for deference—because the agency authored the text and is best positioned to explain its intended construction. The court used Andryeyeva to justify deference even where the equities (pandemic shortage) favored the petitioner.
  • Matter of Spence v Office of the N.Y. State Comptroller, 240 AD3d 1067 (3d Dept 2025)
    Reinforced the “rational basis” standard: if supported by a rational basis, an administrative determination must be sustained even if a court might have reached a different result.
  • Matter of Dell'Olio v New York State Off. of Temporary & Disability Assistance, 166 AD3d 614 (2d Dept 2018)
    This was the most directly analogous interpretive support. The Third Department relied on Dell’Olio for the proposition that 18 NYCRR 360-7.5’s reimbursement mechanism is anchored to eligibility-related errors/delays rather than broader operational failures in the delivery of services.
  • Matter of Concourse Rehabilitation & Nursing Ctr., Inc. v Zucker, 217 AD3d 1189 (3d Dept 2023) and Matter of Wayne Ctr. for Nursing & Rehabilitation, LLC v Zucker, 197 AD3d 1409 (3d Dept 2021), lv denied 37 NY3d 919 (2022)
    Both cases supported the broader administrative-law theme: where the agency’s interpretation is rational and text-consistent, courts will not substitute their judgment. Here, they functioned as reinforcing authority for deference to DOH’s reading of its Medicaid payment regulations.
  • Greenstein v Bane, 833 F Supp 1054 (SD NY 1993) and Seittelman v Sabol, 91 NY2d 618 (1998)
    The petitioner invoked Greenstein to argue for broader reimbursement principles under federal Medicaid comparability requirements. The court distinguished it: Greenstein concerned disparate treatment of recipients based on the mechanism used to correct an erroneous eligibility determination, not an expansion of what counts as a reimbursable “error” under state regulation, and not provider-shortage-driven private payments. Seittelman was cited to confirm Greenstein’s limited reach.
  • Matter of Atlanticare Mgt., LLC v Ives, 212 AD3d 132 (3d Dept 2022), lv denied 40 NY3d 902 (2023)
    Provided the rule that an unexplained departure from agency precedent in similar cases can be arbitrary and require reversal. The court applied the principle but found petitioner’s cited fair-hearing decisions did not establish a settled contrary practice.
  • Matter of Connerton v Ryan, 86 AD3d 698 (3d Dept 2011) and Matter of Shining Star Home Care, LLC v Zucker, 215 AD3d 1090 (3d Dept 2023)
    These cases supported the exhaustion principle: alleging due process does not excuse failure to pursue administrative remedies capable of providing relief. The court used them to reject petitioner’s due process framing where she sought only reimbursement and did not timely challenge any delay in service delivery via an appropriate hearing request.
  • Matter of Rispoli v DiNapoli, 180 AD3d 1127 (3d Dept 2020)
    Cited for preservation limits on judicial review. The court used it (along with Dell’Olio) to decline considering federal arguments not raised at the fair hearing: a claim under 42 CFR 431.246 and a challenge that the CBIC-based limitation violates federal Medicaid law.

3.2 Legal Reasoning

(a) Vendor payment and the Medicaid-enrollment gatekeeping function.
The opinion begins from the structural premise of Medicaid payment: covered services are ordinarily paid directly to enrolled providers under the “vendor payment” principle (citing 18 NYCRR 360-7.5[a][1]). The court emphasized why enrollment matters—program standards, oversight, and reimbursement controls—citing 18 NYCRR 504.1(a), 504.3, 504.8, and 517.3. This framing sets up reimbursement as an exception to a rule designed to avoid precisely what occurred here: direct consumer payment to non-enrolled providers.

(b) The narrow trigger for recipient reimbursement under 18 NYCRR 360-7.5.
The decisive move is textual and categorical. The court reads 18 NYCRR 360-7.5(a)(3)(i)(a) and (b) as authorizing reimbursement when: (1) an erroneous eligibility determination is reversed, or (2) the district fails to determine eligibility within prescribed timeframes, and that error/delay causes the recipient to pay for medically necessary services that Medicaid otherwise would have paid.

On that reading, “error or delay” is not a free-floating equitable concept; it is tethered to eligibility determination processes (including, as the court noted, determinations of level/duration of services). Because the County timely found petitioner eligible for Medicaid (October 2020) and then promptly authorized personal care services after application (about one week in July 2021), the court concluded the regulatory trigger was not met—even though the County could not furnish an available Medicaid-enrolled aide.

(c) Deference and the limits of equity-driven interpretation.
The court acknowledged the petitioner’s “persuasive” equities and the ALJ’s finding that the daughter’s efforts were “persuasive and compelling,” but held that the agency’s interpretation was rational and consistent with the regulation’s plain language. Under the deference authorities cited, that ended the inquiry: the court would not rewrite the regulation to address pandemic-driven service gaps.

(d) Administrative directives cannot expand duly promulgated regulations.
Petitioner relied on DOH Administrative Directive 10 OHIP/ADM-9, which suggested reimbursement “may also be available” due to a delay in providing personal care services. The court rejected this as a source of enforceable rights independent of 18 NYCRR 360-7.5, invoking the Rovinsky principle that regulations prevail over conflicting guidance. The court further noted DOH reissued the directive without the confusing language to reflect the regulation’s limited reimbursement circumstances.

(e) No arbitrariness shown through fair-hearing decisions.
Although the court recognized the rule from Atlanticare that an unexplained departure from agency precedent can be arbitrary, it found the cited fair-hearing outcomes distinguishable: they involved reversed eligibility/service-level determinations or expenses incurred during retroactive/pre-CBIC periods expressly contemplated by regulation. An isolated 2012 decision invoking “constructive discontinuance” did not establish a settled practice, and petitioner had not pursued prospective relief or framed her claim as a discontinuance.

(f) Exhaustion and preservation as independent barriers.
The court rejected petitioner’s due process theory because she did not pursue available administrative channels to challenge the service-delivery delay itself, seeking only reimbursement. Separately, it declined to consider federal-law arguments (42 CFR 431.246; federal Medicaid preemption/comparability issues) because they were not raised at the fair hearing, and thus were unpreserved.

3.3 Impact

Clarified boundary between eligibility errors and service-delivery failures.
The decision cements a restrictive construction of 18 NYCRR 360-7.5 in the Third Department: reimbursement to recipients is not available simply because authorized services were not practically deliverable (even during extraordinary circumstances like a pandemic) if eligibility and authorization determinations were timely and correct.

Limits on using guidance documents to obtain monetary relief.
By treating DOH directives as non-binding when they exceed or conflict with regulations, Tomei strengthens the position that reimbursement rights must be grounded in duly promulgated regulatory text, not informal guidance.

Strategic implications for recipients and advocates.
The opinion signals that reimbursement claims framed solely as “we paid because no aide was available” are unlikely to succeed under 18 NYCRR 360-7.5 post-CBIC. Parties may instead need to: (1) timely challenge delays/failures in service delivery through appropriate administrative processes seeking prospective relief; and/or (2) preserve federal-law arguments explicitly at the fair-hearing level if they intend to litigate them in court.

Administrative-law ripple effects.
Tomei also reinforces two recurring constraints on Article 78 review: (1) strong deference to an agency’s reasonable reading of its own regulations; and (2) strict insistence on exhaustion/preservation, even where the facts evoke substantial equitable sympathy.

4. Complex Concepts Simplified

  • CBIC (Common Benefit Identification Card): The standard Medicaid ID card proving enrollment. In this case, having a CBIC mattered because the reimbursement regulation is tightly linked to pre-enrollment/eligibility-timing problems, not post-enrollment service shortages.
  • Vendor payment principle: Medicaid generally pays the provider directly, not the patient. Reimbursement to patients is an exception, not the norm.
  • Medicaid-enrolled provider: A provider approved to bill Medicaid and subject to Medicaid rules and oversight. Payments to non-enrolled providers are generally disfavored, which is why reimbursement was treated as narrowly limited.
  • 18 NYCRR 360-7.5 “error and delay” reimbursement: A corrective-payment mechanism that applies when the government’s eligibility determination was wrong or too slow, forcing the recipient to pay out of pocket for otherwise-covered services. Tomei holds it does not extend to delays in obtaining an available aide once eligibility/authorization is correctly established.
  • Agency deference: Courts often accept an agency’s reasonable interpretation of its own regulation. Unless the agency reading contradicts the text, courts will usually not substitute their preferred policy outcome.
  • Exhaustion and preservation: You generally must (1) use available administrative procedures first (exhaustion), and (2) raise legal arguments at the administrative hearing to be allowed to raise them later in court (preservation).
  • Constructive discontinuance: A concept sometimes used when services are effectively stopped through inaction or delay, even without a formal termination notice. Tomei treats a single fair-hearing use of this concept as insufficient to establish a binding practice—especially where the petitioner did not actually pursue that theory or seek prospective relief.

5. Conclusion

Matter of Tomei v McDonald establishes a clear, text-centered limitation on Medicaid recipient reimbursement in New York: under 18 NYCRR 360-7.5, reimbursement is available for out-of-pocket payments only when tied to errors or delays in eligibility (or eligibility-related service determinations) as specified in the regulation, not when a recipient purchases substitute care because the system cannot supply a Medicaid-enrolled provider after eligibility is already established.

The court’s deference to the agency’s interpretation, rejection of directive-based expansion, and insistence on exhaustion/preservation make Tomei significant not only for Medicaid home-care disputes, but also as a broader administrative-law marker: equitable hardship—even during a public-health crisis—will not overcome clear regulatory boundaries absent preserved federal claims or a properly pursued administrative challenge directed at the service-delivery failure itself.