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Pent-up Demand This analysis assumes that the populations who have not had recent full Medicaid coverage (e.g., TMA coverage or 12 months postpartum coverage) have experienced barriers that restricted use of medical services through higher member cost sharing or lack of insurance coverage. As a result, upon receiving Medicaid coverage, it is anticipated that these members will utilize services at higher rates, at least initially. Additionally, this analysis assumes that the most acute members would likely enroll first and the healthier members may be slower to enroll. Higher service utilization related to pent-up demand is assumed to last for 18 months and decrease over time. Morbidity Compared to the current Medicaid adult TANF population in South Carolina, it is anticipated that the Palmetto Pathways to Independence waiver population would have lower morbidity. The lower expected morbidity of approximately 15% is driven by the expectation that this population would be healthier than the current adult TANF population in South Carolina due to the higher income. Expenditure Trend The per capita expenditures for the Palmetto Pathways to Independence waiver population were projected forward at a rate of approximately 6% per year for the remainder of the projection period, which includes the average historical healthcare inflation and is consistent with the president’s trend. This trend rate includes the impact of utilization, mix, intensity, and cost per unit. The trend rate used in the projection assumes that SCDHHS would implement policy actions to maintain trend rates at the assumed levels. Administrative Expenditures This analysis assumes SCDHHS’ administrative costs are equal to approximately 3.5% of healthcare expenditures, consistent with the assumed long-term administrative costs. An additional 2% in administrative costs is applied to the first two years (SFY 2027 and SFY 2028) to account for higher costs initially as SCDHHS administers a new program. Administrative expenditures reflect estimated expenses related to SCDHHS's ongoing administration of the Palmetto Pathways to Independence waiver program. Start-up and implementation expenses are not included in these estimates. State Directed Payments (SDPs) The SDP programs effective in SFY 2025 are assumed to apply to the Palmetto Pathways to Independence waiver population at a PMPM cost consistent with the TANF Adult and TANF SMI rate cells assumptions in the current Medicaid program. Expenses related to SDPs are assumed to increase at an annual rate of 6%, consistent with the president’s trend. Please note, CMS requires that SDPs are submitted and approved annually. As such, components of SDP programs design may change prior to the implementation of the Palmetto Pathways to Independence waiver program. Section 10: List of Proposed Waivers and Expenditure Authorities 1. Eligibility SSA Sections1902(a)(8) and 1902(a)(10) 14