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 $376 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 $333. 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		46,488				49,777			$	11,148,672
514		83,256				85,463				10,060,432
1519		96,673				96,687				8,437,624
2024		67,046				68,682				9,540,224
2534		134,296				133,354				26,433,008
3544		167,676				176,246				38,882,908
4554		86,296				91,689				22,742,736
5564		99,424				102,723				28,692,512
6574		157,088				162,359				49,518,944
7584		68,695				73,265				33,433,560
85 years and older		24,299				27,649				24,287,275
		1,031,237				1,067,894			$	263,177,895

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 $358. Calculate the new target cost assuming again that VIP-MD wants to maintain the same profit per enrollee as in the current year.