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 $360 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 $317. 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		44,888				48,177			$	11,147,072
514		81,656				83,863				10,058,832
1519		95,073				95,087				8,436,024
2024		65,446				67,082				9,538,624
2534		132,696				131,754				26,431,408
3544		166,076				174,646				38,881,308
4554		84,696				90,089				22,741,136
5564		98,424				101,123				28,690,912
6574		155,488				160,759				49,517,344
7584		67,095				71,665				33,431,960
85 years and older		22,699				26,049				24,285,675
		1,014,237				1,050,294			$	263,160,295

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 $342. Calculate the new target cost assuming again that VIP-MD wants to maintain the same profit per enrollee as in the current year.