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VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service model that determines the payment according to the actual services used or costs incurred, VIP-MD receives a fixed, prepaid amount from subscribers. The per member, per month rate (PMPM) is determined by estimating the health care cost per enrollee within a geographic location. The average health care coverage in North Carolina costs $373 per month, which is the same amount irrespective of the subscribers age. Because individuals are demanding quality care at reasonable rates, VIP-MD must contain its costs to remain competitive. A major competitor, National Physicians, entered the North Carolina market early in the current year with a monthly premium of $330. VIP-MD wants to maintain its current market penetration and hopes to increase its enrollees in the current year. The latest data on the number of enrollees and the associated costs follow:

Age	Enrollment in Current Year				Projected Enrollment Next Year				Average Monthly Cost in Current Year
14		46,188				49,477			$	11,148,372
514		82,956				85,163				10,060,132
1519		96,373				96,387				8,437,324
2024		66,746				68,382				9,539,924
2534		133,996				133,054				26,432,708
3544		167,376				175,946				38,882,608
4554		85,996				91,389				22,742,436
5564		99,724				102,423				28,692,212
6574		156,788				162,059				49,518,644
7584		68,395				72,965				33,433,260
85 years and older		23,999				27,349				24,286,975
		1,028,537				1,064,594			$	263,174,595

Required:

1. Calculate the target cost required for VIP-MD to maintain its current market share and profit per enrollee in the current year.

2. Costs in the health care industry applicable to VIP-MD and National Physicians are expected to increase by 8% in the coming year. VIP-MD is planning for the year ahead and is expecting all providers, including VIP-MD and National Physicians, to increase their rates by $25 to $355. Calculate the new target cost assuming again that VIP-MD wants to maintain the same profit per enrollee as in the current year.

(For all requirements, do not round intermediate calculations and round your answers to 2 decimal places.)