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 $363 per month, which is the same amount irrespective of the subscriber's 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 $320. 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 1-4 5-14 15-19 20-24 25-34 35-44 45-54 55-64 65-74 75-84 85 years and older Enrollment in Current Year 45,188 81,956 95,373 65,746 132,996 166, 376 84,996 98,724 155,788 67,395 22,999 1,017,537 Projected Enrollment Next Average Monthly Cost Year in Current Year 48,477 $ 11,147,372 84,163 10,059, 132 95,387 8,436, 324 67,382 9,538,924 132,054 26,431,708 174,946 38,881,608 90,389 22,741,436 101,423 28,691,212 161, 059 49,517,644 71,965 33,432,260 26,349 24,285,975 1,053,594 $ 263,163,595 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 7% 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 $345. 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.) 1. Required target cost 2. New target cost