Washington, D. C. 20549

                             Form 10-K


[X] Annual report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934  for  the  fiscal  year ended December 31,
    1997; or

[ ] Transition report  pursuant  to  Section  13  or  15(d)  of the
    Securities Exchange Act of 1934


Commission file number: 0-12024
                        -------

                    MAXICARE HEALTH PLANS, INC.
      ------------------------------------------------------
      (Exact name of registrant as specified in its charter)


          Delaware                               95-3615709
-------------------------------             -------------------
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)              Identification No.)


1149 South Broadway Street, Los Angeles, California     90015
---------------------------------------------------------------
(Address of principal executive offices)             (Zip Code)


Registrant's telephone number, including area code: (213) 765-2000
                                                    --------------

      Securities registered pursuant to Section 12(b) of the Act:


                                         Name of each exchange
          Title of each class             on which registered
          -------------------            ---------------------
                None                             None


      Securities registered pursuant to Section 12(g) of the Act:


                  Common Stock, $.01 par value
                  ----------------------------
                        (Title of Class)


    Indicate by check mark whether the Registrant (1) has filed all
reports required  to  be  filed  by  Section  13  or  15(d)  of the
Securities Exchange Act of 1934  during the preceding 12 months (or
for such shorter period  that  the  registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.


                        YES   X    NO
                            -----     -----


    Indicate by  check  mark  if  disclosure  of  delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained,  to  the  best of Registrant's knowledge, in
definitive  proxy   or   information   statements  incorporated  by
reference in Part III of  this  Form  10-K or any amendment to this
Form 10-K.


                            -----


    The aggregate market value  of  the  voting  stock held by non-
affiliates of the registrant as of March 25, 1998:


      Common Stock, $.01 par value - $197,179,191


    The number  of  shares  outstanding  of  each  of  the issuer's
classes of capital stock, as of March 25, 1998:


      Common Stock, $.01 par value - 17,925,381 shares




                  DOCUMENTS INCORPORATED BY REFERENCE

                              None.

<PAGE>


                              PART I
                              ------

Item 1. Business
        --------

General
-------

Maxicare Health Plans, Inc.,  a  Delaware corporation ("MHP"), is a
holding company which owns  various  subsidiaries, primarily in the
field of  managed  health  care.    MHP  and  its subsidiaries (the
"Company") have a combined  enrollment  of approximately 515,000 as
of December 31, 1997, representing an increase in enrollment of 22%
from December 31, 1996.   MHP  owns  and operates a system of seven
health maintenance organizations  ("HMOs")  in California, Indiana,
Illinois, Louisiana, North Carolina,  South Carolina, and Wisconsin
and  additionally  operates  Maxicare  Life  and  Health  Insurance
Company  ("MLH")  and  HealthAmerica  Corporation.    Through these
subsidiaries, the  Company  offers  an  array  of  employee benefit
packages, including group HMO, Medicaid and Medicare HMO, preferred
provider organization ("PPO"),  point  of  service  ("POS"),  group
life   and   accidental    death   and   dismemberment   insurance,
administrative services only programs,  wellness programs and other
services and products.

Through its HMO operations the Company arranges for the delivery of
comprehensive  health  care   services   to   its   members  for  a
predetermined, prepaid fee.   The  Company generally provides these
services by  contracting  on  a  prospective  basis  with physician
groups for a  fixed  fee  per  member  per  month regardless of the
extent  and  nature  of  services  provided  to  members,  and with
hospitals and other providers under  a variety of fee arrangements.
The Company believes  that  an  HMO  offers certain advantages over
traditional indemnity health insurance:

    -   To the member, an  HMO offers comprehensive and coordinated
        health care programs,  including  preventive services, with
        predictable  out-of-pocket  expense  and  generally without
        requiring claims forms.

    -   To the employer, an  HMO  offers  an opportunity to improve
        the  breadth  and   quality   of  health  benefit  programs
        available  to  employees  and   their  families  without  a
        significant increase in cost or administrative burdens.

    -   To health  care  providers,  such  as  physician groups and
        hospitals,  an  HMO  provides  a  more  predictable revenue
        source.

The Company's executive offices are  located at 1149 South Broadway
Street, Los Angeles, California 90015,  and its telephone number is
(213) 765-2000.

<PAGE>

Company Operations
------------------

The Company's total membership has grown from approximately 423,000
members at December 31,  1996  to  approximately 515,000 members at
December 31, 1997.  The  Company's  membership at December 31, 1997
is as follows:


                                  Governmental
                  Commercial (Medicaid & Medicare)  Total      %
                  ---------- --------------------- -------  ------
California         156,200          97,700         253,900   49.3%
Indiana            106,300          73,900         180,200   35.0%
Other States        68,100          12,800          80,900   15.7%
                   -------         -------         -------  ------
Total Membership   330,600         184,400         515,000  100.0%
                   =======         =======         =======  ======

Overview of Managed Health Care Services
----------------------------------------

HMO.  The Company owns  and  operates a multi-state system of HMOs.
An HMO is an organization that arranges for health care services to
its members.   For  these  services,  the  members' employers pay a
predetermined premium fee that  does  not  vary  with the nature or
extent of health  care  services  provided  to  the member, and the
member may pay a  relatively  small copayment for certain services.
The fixed payment  distinguishes  HMOs  from conventional indemnity
health  insurance  plans  that   contain  customary  copayment  and
deductible features and also require the submission of claim forms.
An HMO receives a fixed  amount from its contracted employer groups
for its members regardless of the  nature and extent of health care
services provided, and as a  result,  has  an incentive to keep its
members healthy and to  manage  its  costs through measures such as
the monitoring of hospital admissions  and the review of specialist
referrals by primary care physicians.  The HMO's goal is to combine
the delivery of and  access  to  quality  health care services with
effective management  controls  in  order  to  make  the most cost-
effective use of health care resources.

Although HMOs have been  operating  in  the  United States for over
half of a century, their  popularity  began increasing in the 1970s
in response to rapidly  escalating  health care costs and enactment
of the  Federal  Health  Maintenance  Organization  Act  of 1973, a
federal statute designed to promote the establishment and growth of
HMOs (see "Item 1. Business - Government Regulation").

The four  basic  organizational  models  utilized  by  HMOs are the
staff, group, independent practice  association and network models.
The distinguishing feature between models is the HMO's relationship
with its physicians.    In  the  staff  model,  the HMO employs the
physicians  directly  at  an   HMO  facility  and  compensates  the
physicians by salary  and  other  incentive  plans.    In the group
model, the HMO contracts with a multi-specialty physician group
<PAGE>

which provides services primarily  for  HMO  members and receives a
fixed monthly  fee,  known  as  capitation,  for  each  HMO member,
regardless of the nature  and  amount  of  services provided to the
member.  Under the  independent practice association ("IPA") model,
the HMO generally contracts on  a capitated basis or discounted fee
for service basis through  either  a physicians' association, which
in turn contracts directly  with individual physicians, or directly
with individual  physicians.    In  either  case,  these physicians
provide care in their  own  offices.    Under  the network model of
organization, the  HMO  contracts  with  numerous  community multi-
specialty  physician  groups,  hospitals   and  other  health  care
providers.  The physician groups  are paid primarily on a capitated
basis, as in the group model,  but medical care is usually provided
in the physician's  own  facilities.    The  Company's HMOs utilize
network, group  and  independent  practice  association  models. In
addition to these models, the  Company's HMOs in Illinois, Indiana,
North and South Carolina and  Wisconsin also contract directly with
individual physicians and  physician  practices. Under these direct
contracts, physicians are reimbursed  in  accordance with an agreed
upon fee  schedule  for  actual  health  care  services rendered to
members.

Medicaid.  Medicaid is a state-operated program which utilizes both
state and  federal  funding  to  provide  health  care  services to
qualified low-income residents.  A Medicaid managed care initiative
developed by a state must  be  approved by the federal government's
Health Care Financing Administration  ("HCFA").  HCFA requires that
Medicaid managed care plans meet federal standards and cost no more
than the amount that would have  been spent on a comparable fee for
service basis.    Under  the  contract  with  a  state, the Company
receives a  fixed  monthly  payment  for  which  it  is required to
provide  managed  health  care  services  to  a  member.   Medicaid
beneficiaries do not pay any premiums, deductibles or copayments.

Effective January  1995,  the  Indiana  HMO  entered  into two year
contracts with the  State  of  Indiana  to  provide HMO services to
Medicaid  recipients  in  the  northern  and  southern  regions  of
Indiana.  These contracts were renewed  by the State of Indiana for
the 1997 year and the  1998  year  upon the conclusion of which the
contracts will expire.  The State of Indiana is expected to solicit
bids for a two year contract  period commencing January 1, 1999 for
the northern and southern regions.   The Indiana HMO intends to bid
on these  contracts.    Effective  January  1997,  the  Indiana HMO
entered into a  two  year  contract  with  the  State of Indiana to
provide HMO services to  Medicaid  recipients in the central region
of Indiana.  This contract  provides for annual continuation of the
contract for the 1999 year  and  2000  year  at the election of the
State of Indiana.   As  of  December  31, 1997 the Medicaid program
comprised approximately 70,200 members  of  the Indiana HMO's total
enrollment.  The Medicaid  membership  in the northern, central and
southern  regions  as  of  December  31,  1997  approximated 36,600
members, 8,900 members and 24,700 members, respectively.

In December 1994, the California  HMO  contracted with the State of
California to provide HMO services to Medicaid recipients in Los
<PAGE>

Angeles County.  This contract  was  renewed  for one year terms in
July 1995  and again in July 1996.  In 1996 the State of California
began implementation of a new  mandatory managed care program which
resulted in a publicly-sponsored  health  plan being established in
Los Angeles County  to  serve  the  Medicaid population ("L.A. Care
Health Plan").  L.A.  Care  Health  Plan and Foundation Health (the
commercial health plan)  have  both  contracted  with  the State of
California for this new managed  care  program.  The California HMO
has contracted for a three year  term with L.A. Care Health Plan to
provide HMO services upon  the  operational  effective date of this
new program.  This new program,  which  was   designed in part as a
replacement to the existing  Medicaid  fee  for service and managed
care programs in Los Angeles County, became operational during 1997
at which point in time  the California HMO's Medicaid contract with
the State of California  was  discontinued.  Effective January 1998
Medi-Cal beneficiaries  with  a  mandatory  enrollment  code within
certain aid  categories  are  required  to  choose  between the two
authorized health plans.   Those  beneficiaries  who make no choice
will be assigned  to  either  L.A.  Care  Health Plan or Foundation
Health.  Beneficiaries assigned to    L.A. Care Health Plan in turn
will be allocated among  its  plan partners including the Company's
California HMO.  As  of  December  31,  1997 the Los Angeles County
Medicaid program  comprised  approximately  36,600  members  of the
California HMO's total enrollment.  Although  the Company cannot be
certain at this  point  in  time  of  the  effects from the ongoing
implementation of this program, it  believes the Los Angeles County
Medicaid membership of  the  California  HMO  will increase in 1998
from the current membership level.

Effective July 1, 1997 the  California HMO signed an agreement with
Molina  Medical  Centers  ("MMC")  which  assigned  MMC's  Medi-Cal
contracts for  the  provision  of  services  in  San Bernardino and
Riverside Counties  (the  "San  Bernardino/Riverside Contract") and
Sacramento County (the  "Sacramento  Contract")  with  the State of
California  to  Maxicare.    The  California  HMO  entered  into an
agreement with MMC as a  provider  in those service areas effective
July 1, 1997.  The  remaining  term  for the Sacramento Contract is
for the period through December  31,  1998.  The California HMO has
filed a letter of intent with  the  State of California to bid on a
new three year contract for Sacramento County commencing January 1,
1999.  As of  December  31,  1997 the Sacramento Contract comprised
approximately  23,700  members   of   the  California  HMO's  total
membership.

The State of California is  currently implementing an new mandatory
managed care program in the  San Bernardino and Riverside Counties.
Under this new program, the State of California has contracted on a
multi-year basis with  MMC  as  the  commercial  health  plan and a
publicly-sponsored health plan to  provide HMO services to Medicaid
recipients.  This  new  program  has  been  designed  in  part as a
replacement to the existing  Medicaid  fee  for service and managed
care programs in  San  Bernardino  and  Riverside Counties and upon
transition  to  this  new   program  the  San  Bernardino/Riverside
Contract assigned to the  Company  will be effectively discontinued
upon the completion of the transition process.  Absent a
<PAGE>

definitive  contractual  relationship   with   either  MMC  or  the
publicly-sponsored health plan to  participate  in the new program,
the California HMO will  cease  to  service Medicaid members in San
Bernardino and Riverside Counties after the transition is complete.
The California  HMO  does  not  presently  have  such  a definitive
contract with  either  of  the  continuing  health  plans.    As of
December 31, 1997  the  San Bernardino/Riverside Contract comprised
approximately  33,200  members   of   the  California  HMO's  total
membership.

The North Carolina HMO  and  Wisconsin  HMO have contracted for one
year terms with the states  of  North Carolina and Wisconsin, since
1995  and  1984,  respectively  to  provide  HMO  services  to  the
respective states' Medicaid recipients.    As of December 31, 1997,
the Company's Medicaid programs  comprised approximately 34% of the
Company's total enrollment.

Medicare.  The  Company  has  entered  into federally sponsored one
year  Medicare  contracts  to  provide  HMO  services  to  Medicare
beneficiaries in California and  Indiana.    The programs, known as
MAX 65plus,  provide  Medicare  recipients  with  standard Medicare
coverage and preventive  services  not  available under traditional
fee for service Medicare  for  little  or no out-of-pocket expense.
MAX  65plus  pays  all   coinsurance  and  deductible  amounts  the
recipient  would  have   under   standard  Medicare  coverage.  The
Company's Louisiana  HMO  filed  an  application  with  the federal
government for approval to  also  contract  to provide HMO services
through the MAX  65plus  program.    Upon completing a supplemental
filing, the Louisiana HMO  anticipates scheduling a site inspection
visit by the federal Medicare  agency  before the fourth quarter of
1998. The MAX  65plus  programs  comprised  approximately 2% of the
Company's total enrollment as of December 31, 1997.

PPO.  PPO  products  include  certain  attributes  of managed care;
however,  a  PPO  is   similar  to  conventional  indemnity  health
insurance in  that  it  provides  a  member  with  the unrestricted
flexibility to choose a  physician  or  other health care provider.
In a PPO, the  member  is  encouraged,  through financial and other
incentives, to use participating  health  care providers which have
contracted with the PPO  to  provide  services at discounted rates.
In the event a member elects not to use a participating health care
provider, the member may be  required  to pay a higher co-insurance
plus a    portion  of  the  provider's  fees  as  in a conventional
indemnity plan. The Company's  PPO  products are generally marketed
in conjunction with the Company's  HMO products.  The Company's PPO
business began in Indiana  in  the  fourth  quarter of 1989 and has
expanded to  California,  Louisiana,  Illinois  and North Carolina.
The  PPO  line  of  business  comprised  approximately  1%  of  the
Company's total enrollment at December 31, 1997.

POS.  The Company also  offers  a  point of service ("POS") product
which is designed for  the  large  employer who is promoting single
carrier consolidation and employee transition from PPO or indemnity
product into managed  care  programs.    This  product combines the
elements of an HMO with the elements of a conventional indemnity
<PAGE>

health insurance product  by  permitting  members to participate in
managed care but allowing them to  choose, at the time services are
required, to use providers  not  participating  in the managed care
network.  Deductibles and copayments generally increase the out-of-
pocket costs  to  the  member  if  a  non-participating provider is
utilized.

Specialty Managed Care and  Other  Insurance Services.  In addition
to its core HMO operations, the Company offers a range of specialty
managed care and other insurance  services.    The Company offers a
number of  pharmacy  programs  including  benefit design, formulary
management, claims processing and mail order services for employers
and their employees.   Through  MLH,  the Company offers group life
and accidental death and dismemberment insurance products.

Health Care Services
--------------------

In exchange for a predetermined  monthly  payment, an HMO member is
entitled to receive a broad range of health care services.  Various
state and federal regulations require  an  HMO to offer its members
physician and hospital services  and adult and pediatric preventive
care, and permit an HMO to offer certain supplemental services such
as dental care and prescription drug services at additional cost.

The Company's  members  generally  receive  the  following range of
health care services:

    Primary Care  Physician  Services  -  medical  care provided by
    primary  care   physicians   (typically  family  practitioners,
    general internists  and  pediatricians).    Such care generally
    includes periodic  physical  examinations,  well-baby  care and
    other preventive health services,  as  well as the treatment of
    illnesses not requiring referral to a specialist.

    Specialist  Physician  Services  -  medical  care  provided  by
    specialist physicians on referral  from the responsible primary
    care physicians.  The  most commonly used specialist physicians
    include obstetrician-gynecologists, cardiologists, surgeons and
    radiologists.

    Hospital Services  -  inpatient  and  outpatient  hospital care
    including room and  board,  diagnostic  tests,  and medical and
    surgical procedures.

    Diagnostic  Laboratory  Services  -  inpatient  and  outpatient
    laboratory tests.

    Diagnostic  and  Therapeutic  Radiology  Services  -  X-ray and
    nuclear  medicine  services,   including   CT  scans,  MRI  and
    therapeutic radiological procedures.

    Prescription Drug Services -  outpatient prescription drugs for
    commercial HMO members  and  certain over-the-counter drugs for
    Medicaid members.
<PAGE>


    Other  Health  Services  -   medical  and  surgical  procedures
    performed on  an  outpatient  basis,  including  emergency room
    services  where   such   services   are   medically  necessary,
    outpatient   surgical   procedures,   evaluation   and   crisis
    intervention,  mental  health  services,  physical  therapy and
    other  similar  services   in   which  hospitalization  is  not
    medically necessary or appropriate.

    Other Services -  other  related  health  care services such as
    ambulance,  durable  medical  supplies  and  equipment,  family
    planning  and   infertility   services   and  health  education
    (including  prenatal  nutritional  counseling,  weight-loss and
    stop-smoking programs).

Additional optional services available  to  HMO members may include
inpatient psychiatric care, hearing  aids, dental care, vision care
and chiropractic care.

Delivery of Health Care Services
--------------------------------

The Company's HMOs arrange for the delivery of health care services
to their members by contracting with physicians, either directly or
through IPAs and medical  groups,  hospitals  and other health care
providers.  The Company's HMOs  typically  pay to the physicians or
contracting entity a fixed  monthly  capitation fee for each member
assigned to the physician or contracting entity.  The amount of the
monthly capitation fee does not  vary  with the nature or extent of
services  utilized.    In  exchange  for  the  capitation  fee, the
physicians  provide  professional  services  to  members, including
providing or arranging for laboratory services and X-rays.

Members select a primary care  physician to serve as their personal
physician from a listing of contracting physicians or groups.  This
physician will oversee  their  medical  care  and  refer  them to a
specialist when  medically  necessary.    In  order  to attract new
members and retain existing members, the Company's HMOs must retain
a network of quality physicians  and groups and continue to develop
agreements with new physician groups.

The Company's  HMOs  contract  for  hospital  services with various
hospitals  under  a  variety  of  arrangements,  including fee-for-
service,  discounted  fee-for-service,  per  diem  and  capitation.
Hospitalization costs are not  generally included in the capitation
fee paid by the  Company's  HMOs  to  physician  groups.  Except in
emergency situations, a  member's  hospitalization must be approved
in advance by  the  utilization  review  committee  of the member's
physician group and/or the  Company's  HMOs  and must take place in
hospitals contracted  with  the  Company's  HMOs.    When emergency
situations arise requiring medical  care by physicians or hospitals
not contracted with the  Company's  HMOs, the Company's HMOs assume
financial responsibility for the cost of medically necessary care.
<PAGE>


Quality Assurance
-----------------

As required by federal  and  state  law,  the Company evaluates the
quality and appropriateness of  the  medical  care delivered to its
members  by   its   independently   contracted   providers.    When
considering whether to contract with  a provider, the HMO evaluates
the  quality  of  the  physician  or  group's  medical  facilities,
professional  qualifications  and   the   capacity  to  accommodate
membership demands.  Among the means  used to gauge the quality and
appropriateness of care  are:  the  performance of periodic medical
care evaluation studies,  the  analysis  of  monthly utilization of
certain services, the  performance  of periodic member satisfaction
studies  and  the  review  and  response  to  member  and physician
grievances.

The  Company  compiles   a   variety   of  statistical  information
concerning the utilization of various services, including emergency
room care, outpatient care, out-of-area services, hospital services
and  physician  visits.     Under-utilization   as  well  as  over-
utilization is  closely  evaluated  in  an  effort  to  monitor the
quality of care provided to  the Company's members by participating
physicians and physician groups.

The Company's  HMOs  have  member  services  departments which deal
directly  with  members  concerning  their  health  care questions,
comments, concerns and/or grievances.   The Company conducts annual
surveys among members concerning  their  level of satisfaction with
the services they receive.    Management  reviews any problems that
are raised by members concerning  the  delivery of medical care and
receives periodic reports summarizing member grievances.

The  National  Committee  for  Quality  Assurance  ("NCQA")  is  an
independent, non-profit  organization  that  reviews  and accredits
HMOs.  NCQA  performs  an  evaluation  of  an HMO's operations with
respect to standards established  for quality assurance, preventive
health  services,   utilization   management,  reporting,  members'
rights, as well as other factors. During the fourth quarter of 1996
the Company's  Indiana  HMO  voluntarily  applied for accreditation
from the NCQA. The Indiana HMO  received a "denied status" in April
1997 and will re-apply for  accreditation  in April 1998 for a site
visit to be performed in the  latter  half of 1998.  The California
HMO is scheduled for accreditation  review  in March 1999.  Certain
other HMOs of the Company are  in the process of preparing for NCQA
accreditation.

Premium Structure and Cost Control
----------------------------------

The  Company  generally  sets  its  membership  fees,  or premiums,
pursuant to a community  rating  system,  thereby charging the same
nominal premium per class  of  subscriber  within a geographic area
for like services;  however,  groups  which meet certain enrollment
requirements are  charged  premiums  which  may  take  into account
prior cost experience and/or  adjustments  to community rating (see
"Item 1. Business - Government Regulation").
<PAGE>

The Company manages health care costs primarily through contractual
arrangements with  health  care  providers  who  share  the risk of
certain health care costs.   The  Company's HMOs arrange for health
care services  primarily  through  capitation  arrangements.  Under
capitation contracts,  the  HMO  pays  the  IPA,  medical  group or
hospital a fixed amount per enrollee per month to cover the payment
of all or most medical  services regardless of utilization, thereby
transferring the risk of certain  health care costs to the provider
organization.  For the year  ended  December 31, 1997 physician and
hospital capitation represented 65% of total health care costs.

The focus for cost-efficient  use  of medical and hospital services
in the Company's HMOs is  the  primary  care physician or group who
provide services and control  utilization  of services by directing
or approving hospitalization and referrals to specialists and other
providers.   In  order  to  manage  costs  in  situations where the
Company  assumes  the   financial   responsibility  for  specialist
referrals  and  hospital  utilization,   the  Company  may  provide
additional incentives to  health  care  providers for the medically
appropriate, yet efficient utilization of these services.

In addition to directing the Company's health care providers toward
capitation arrangements, the Company has  a variety of programs and
procedures in place  to  encourage  appropriate utilization.  These
programs and procedures are intended  to address the utilization of
inpatient  services,  outpatient  services  and  referral  services
which: (i) verify the  medical  necessity of inpatient nonemergency
treatment  or  surgery,   (ii)   establish   whether  services  are
appropriately performed in an inpatient setting or could be done on
an outpatient basis; and (iii)  determine the appropriate length of
stay for inpatient services,  which  may involve concurrent review,
discharge planning and/or retrospective  review.   In addition, the
Company monitors the  terms  and  procedures  of its pharmacy plan,
incorporating such features  as  drug  formularies.   The Company's
outpatient prescription drug formulary  is developed, monitored and
updated  by  the  Company's   National  Pharmacy  and  Therapeutics
Committee.  This Committee  is  comprised  of the Company's Medical
Directors for the  health  plans,  the  Vice  President of Pharmacy
Services and other representatives.    The formulary is designed to
serve as  a  guideline  in  promoting  cost-effective, quality drug
therapy for the Company's members.

For further information, see  "Item  7. Management's Discussion and
Analysis of  Financial  Condition  and  Results  of Operations" and
"Item 8. Financial  Statements  and Supplementary Data-Consolidated
Statements of Operations" included herein.

Marketing
---------

The Company markets its  commercial  product  to employers or other
groups through direct  selling  efforts  and  through contacts with
insurance brokers  and  consultants.    Members  typically join the
Company's HMOs through an  employer,  who  pays  all or most of the
monthly premium.  In many instances, employers offer employees a
<PAGE>

choice of indemnity health insurance coverage or coverage with PPOs
and HMOs such as those operated  by the Company.  The Company's PPO
and HMO agreements with employers  are  generally  for a term of 12
months, and  automatically  renew  unless  a  termination notice is
given.   Once  the  Company's  relationship  with  the  employer is
established, marketing efforts are then focused on the employees of
these  employers.    During  an  annual  "open  enrollment period",
employees may  select  their  desired  health  care  coverage.  The
primary annual  open  enrollment  period  occurs  in  the  month of
January.    As  of  January  31,  1998,  approximately  57%  of the
Company's commercial members had selected their desired health care
coverage for the ensuing  annual  period.  The Company's commercial
membership is widely  diverse,  with  no  commercial employer group
comprising 10% or more of the Company's total commercial enrollment
with the exception of the State of Indiana employer group which has
approximately  34,000  members  as  of  December  31,  1997.    The
Company's HMOs were offered  by approximately 1,400 employer groups
as of December 31, 1997.

The Company has also developed  a multi-state account program which
offers employers having multiple  locations  in areas served by the
Company's HMOs the  opportunity  to  deal  with one primary account
manager.   Billing  and  enrollment  procedures  are  handled at an
individual  HMO  level,   giving   the   multi-state  employer  the
opportunity  to  monitor  individual  geographic  areas  among  its
employer  population.    For  certain  multi-state  employers,  the
Company develops  individual  marketing  and  benefit  programs for
separate divisions, locations  or  benefit  classes within the same
employer.

The Company believes that  attracting  employers  is only the first
step toward increasing enrollment at each of its HMOs.  Ultimately,
the Company's ability to retain and increase membership will depend
upon how  users  of  the  health  care  system  assess  its benefit
package,  rates,  quality  of   service,  financial  condition  and
responsiveness to user demands.

The Company markets its  Medicare  programs to employer groups with
retiree  groups  and   to   eligible   individuals  through  direct
solicitation and cooperative advertising with participating medical
groups.  The  Company  markets  its  Medicaid  programs pursuant to
guidelines  established  by  the  various  states.    Medicaid  and
Medicare beneficiaries may disenroll  for  any  reason upon 30 days
notice.

Management Information Systems
------------------------------

All of the Company's HMOs are currently linked through a network of
data lines to the  corporate  data  center, allowing the Company to
prepare  and  distribute  management,  accounting  and  health care
services  reports  (including   eligibility,  billing,  capitation,
claims information and  utilization  reports)  on an ongoing basis.
System generated reports contain  budgeted  and actual monthly cost
and utilization statistics relating to physician initiated services
<PAGE>

and hospitalization.  Hospital  reports,  which  are available on a
daily basis, are  further  analyzed  by  the  type of service, days
paid, and actual and average  length  and  cost  of stay by type of
admission.  The Company's  systems  also support efficient transfer
of information with providers and  employer groups.  The Company is
continually  evaluating,  modifying  or  upgrading  its information
systems capabilities in an  effort to realize enhanced capabilities
and  improvement  in  operating  efficiencies.  The  corporate data
center is  located  in  Los  Angeles.  (See  "Item  7. Management's
Discussion and  Analysis  of  Financial  Condition  and  Results of
Operations - Liquidity and Capital Resources").

Competition
-----------

Both the health  care  industry  as  a  whole  and the managed care
industry in particular are increasingly competitive in all markets.
The HMO industry continues  to  gain  market share, particularly at
the expense of indemnity  carriers.    The  Company competes in its
regional  markets  for  employers  and  members  with  other  HMOs,
indemnity health insurers and PPOs  as  well as employers who elect
to self-insure.  In addition,  the Company competes with other HMOs
and PPOs  for  quality  health  care  providers including physician
groups, specialists and hospitals.    Many of these competitors are
larger or have greater financial  resources  than the Company.  The
level of competition varies  from  state  to state depending on the
variety and relative market  share  of indemnity insurance, HMO and
PPO  health  care  services  offered.     The  Company  also  faces
competition from hospitals and other health care providers who have
combined and formed their  own  networks  to contract directly with
employer groups and other prospective customers for the delivery of
health care services.  California,  the largest market in which the
Company operates, is served by a  significant number of HMOs and is
one of the most heavily  penetrated  markets  by HMOs in the United
States.  Competition for members  and market share in the Company's
markets has resulted in an increase in price competition.

The Company believes that the  principal competitive factors in the
managed health care industry are  health  care costs to members and
employers, the quality  and  accessibility of contracted providers,
the variety of health care coverage options offered and the quality
of service to employers,  members  and  providers.  Competition may
result in pressure  to  reduce  premium  rates  or limit the growth
potential of HMOs in a  particular market.  Employers, for example,
are increasingly cost sensitive  in  selecting health care coverage
for their employees, resulting in  market pressures for the Company
to keep its  rates  competitive.    In  addition  to the above, the
Company has recently faced  increased  competition from health care
providers offering not  only  HMO  services  but  PPO and indemnity
health care services as well.   In an effort to remain competitive,
the Company offers  a  variety  of  health care services, including
PPOs,  and  is  actively  exploring  offering  additional  PPO  and
indemnity services.

Competition may also be affected by mergers and acquisitions in the
managed care and general health care industries as companies and
<PAGE>

health care providers seek  to  expand their operating territories,
gain economies of scale  and  increase  market  share.  Many of the
Company's markets, and the  California  market, in particular, have
recently experienced a  number  of  mergers  and acquisitions among
health  care  providers  and/or  managed  care  organizations.    A
significant number  of  the  Company's  principal  competitors have
substantially larger membership or greater financial resources than
the Company.

Government Regulation
---------------------

The federal government and each of  the states in which the Company
conducts its business have adopted laws and regulations that govern
the business activities of  the  Company  to  varying degrees.  The
most important laws affecting  the  Company  are the Federal Health
Maintenance Organization Act of  1973,  as amended (the "HMO Act"),
and the  regulations  thereunder  promulgated  by  the Secretary of
Health  and  Human  Services,  and  the  various  state regulations
mandating compliance with  certain  net  worth  and other financial
tests.

All of the Company's  HMOs  are  federally  qualified under the HMO
Act.    Under  federal  regulations,  services  to  members must be
provided substantially on  a  fixed  prepaid monthly basis, without
regard to the actual  level  of  utilization of services.  Premiums
established by HMOs  may  vary  from  employer  to employer through
composite rate  factors  and  special  treatment  of  certain broad
classes of  members,  including  geographical  location ("community
rating").  Experience  rating  of  accounts (i.e., setting premiums
for a group account based on  that  group's past use of health care
services) is also  permitted  under  federal regulations in certain
circumstances.  From time  to  time,  modifications  to the HMO Act
have been considered by Congress.  The Company is unable to predict
what, if any, modifications to the  HMO Act will be passed into law
or what  effect,  if  any,  such  legislation  would  have upon the
operations, profitability or business prospects of the Company.

Among other areas regulated by  federal and state law, although not
necessarily by each state, are  the  scope of benefits available to
members, the manner  in  which  premiums are structured, procedures
for the review of  quality  assurance, enrollment requirements, the
relationship  between  the  HMO  and  its  health  care  providers,
procedures  for  resolving   grievances,  licensure,  expansion  of
service area, financial condition,  grounds for termination or non-
renewal and patient  rights.    The  HMOs  are  subject to periodic
review and or audit by  the federal and state licensing authorities
regulating them.

A number of jurisdictions in  which the Company's HMOs operate have
enacted small group  insurance  and  rating reforms which generally
limit the ability of insurers and  HMOs  to use risk selection as a
method of controlling costs for  small  group business.  These laws
may generally limit  or  eliminate  use  of pre-existing conditions
exclusions, experience rating  and  industry  class  rating and may
limit the amount of rate increases from year to year.
<PAGE>


All  of  the  Company's  HMOs   are  licensed  by  pertinent  state
authorities and are  subject  to  extensive state regulations which
require periodic  financial  reports  and  compliance  with minimum
equity, capital, deposit  and/or  reserve  requirements.  These and
other requirements limit  the  ability  of  the HMO subsidiaries to
transfer funds to MHP.   The Company has implemented administrative
services  agreements  which  provide  for  MHP  to  furnish various
management,  financial,   legal,   computer  and  telecommunication
services to the HMOs pursuant  to  the  terms of the agreement with
each HMO.

MLH and certain of  the  Company's  HMOs  are subject to regulation
under state insurance holding  company regulations.  Such insurance
holding company laws and regulations generally require registration
with the state Department  of  Insurance  and the filing of certain
reports   describing   capital   structure,   ownership,  financial
condition, certain intercompany  transactions  and general business
activities.   Certain  state  insurance  holding  company  laws and
regulations require prior  regulatory  approval  of,  or in certain
circumstances, prior notice  of,  certain  transactions between the
regulated companies and their affiliates.  The Company's HMOs which
have Medicare risk contracts are  subject  to regulation by HCFA, a
branch  of  the  United  States  Department  of  Health  and  Human
Services.   HCFA  has  the  right  to  audit  HMOs  operating under
Medicare  risk  contracts  to  determine  compliance  with contract
terms, regulations and the  quality  of  care being rendered to the
HMO's  enrollees.    HCFA  also  has  the  right  to  terminate the
Company's  Medicare  contracts  if   the   Company  fails  to  meet
established compliance standards.    The  Company's HMOs which have
Medicaid contracts are subject to both federal and state regulation
regarding services to  be  provided  to Medicaid enrollees, payment
for those services and other attributes of the Medicaid program.

All of the Company's HMOs have contracts with the Federal Employees
Health Benefit Plan  ("FEHBP").    These  contracts  are subject to
extensive  regulation  including  complex  rules  relating  to  the
premium  rates  charged.      The   FEHBP   has  the  authority  to
retroactively audit the premium  rates and seek adjustments thereto
in accordance with specified guidelines.

In 1997 the Health Insurance  Portability and Accountability Act of
1996  ("HIIPA")  became  effective.    HIIPA,  among  other things,
requires  the  guaranteed  issuance   and  renewability  of  health
coverage  for  certain  individuals  and  small  groups, guaranteed
renewability for large  and  small  groups and certain individuals,
limits preexisting  condition  exclusions,  limits  the grounds for
terminating coverage,  provides  for  a  demonstration  project for
medical savings accounts  and  imposes  significant new regulations
and penalties designed to prevent health care fraud and abuse.

Government regulation of health care coverage products and services
is  a  changing  area  of  law  that  varies  from  jurisdiction to
jurisdiction.   Changes  in  applicable  laws  and  regulations are
continually being considered and the interpretations of existing
<PAGE>

laws and rules  may  also  change  from  time  to time.  Regulatory
agencies   generally   have   broad   discretion   in  promulgating
regulations and in interpreting and  enforcing laws and rules.  The
Company is unable to predict  what  regulatory changes may occur or
what may be the  impact  on  the  Company of any particular change.
The  Company  believes  that  it  would  benefit  from  legislative
proposals encouraging  the  use  of  managed  health care; however,
there can  be  no  assurance  that  the  enactment  of  any of such
regulatory change would  not  materially  and  adversely affect the
Company's financial position, results of operations, or cash flows.
Although  the  Company  intends   to  maintain  its  HMOs'  federal
qualifications, state  licenses,  Medicare  and Medicaid contracts,
there can be no assurance that  it  can do so. The Company believes
that it is currently  in  compliance  in all material respects with
the  various  federal   and   state   regulations  and  contractual
requirements applicable to its current operations.

The issue of health care reform  on  both a state and federal level
continues to undergo  discussion  and  examination  within both the
public and private sectors.   Although  the concept of managed care
appears to be  an  integral  part  of  many  proposals, the Company
cannot determine  the  effect,  if  any,  these  proposals or other
reforms, if enacted, may have on  the business or operations of the
Company.

History
-------

The Company's HMO business  originated  in  California in 1973. The
Company began multi-state  operations  in  June  1982 by purchasing
100% of CNA Health Plans, Inc.   As part of its expansion strategy,
the Company  acquired  all  of  the  stock  of  HealthCare USA Inc.
("HealthCare") and  HealthAmerica  Corporation ("HealthAmerica") in
the fourth quarter of  1986.    At  that  time, HealthCare owned or
managed HMOs in  three  states  and  HealthAmerica owned or managed
HMOs in 17 states, including 11 states not previously served by the
Company.  As  a  result  of  these  acquisitions, which were highly
leveraged, and adverse industry conditions, the Company's financial
condition deteriorated significantly culminating  in MHP and forty-
seven affiliated entities filing for protection under Chapter 11 of
the United States Bankruptcy Code  (the "Bankruptcy Code") in March
and April of 1989.

Under  the   Bankruptcy   Code,   substantially   all  pre-petition
liabilities, contingencies and  other  contractual obligations were
discharged upon emergence from Chapter  11 on December 5, 1990, the
"Effective Date" of the plan of reorganization (the "Reorganization
Plan"). Pursuant  to  the  Reorganization  Plan,  the  Company made
distributions of cash, Senior Notes  and Common Stock to holders of
allowed claims and interests  under  the  Reorganization Plan.   On
January 13, 1998  the  United  States  Bankruptcy  Court entered an
order closing all of  the  jointly administered bankruptcy cases of
the Company, with  the  exception  of  the  Penn Health Corporation
bankruptcy case, having determined that the Reorganization Plan had
been consummated. The Company  believes  the resolution of the Penn
Health Corporation bankruptcy case and certain other matters
<PAGE>

relating to the Reorganization  Plan  will not adversely impact the
Company's ongoing business and operations.  (See "Item 8. Financial
Statements  and  Supplementary  Data  -  Note  9  to  the Company's
Consolidated Financial Statements").

Preferred Stock Redemption
--------------------------

On February 13, 1995 the Company announced that it would redeem all
of its  2.29  million  outstanding  shares  of  Series A Cumulative
Convertible Preferred Stock ("Series  A  Stock") on March 14, 1995.
Holders of Series A Stock were entitled to either have their shares
redeemed by the  Company  at  $25.4625  per  share (the "Redemption
Price"), which represents the redemption  price of $25.00 per share
plus accrued and unpaid dividends  of  $.4625 per share, or convert
their Series A Stock  into  2.7548  shares  of the Company's Common
Stock for each  share  of  Series  A  Stock  converted.  Holders of
Series A Stock who wished to convert their shares into Common Stock
were required  to  deliver  written  notice  of  their  election to
convert  and  tender  the  Series  A  Stock  certificates  properly
endorsed to the redemption  agent,  American Stock Transfer & Trust
Company, no later than 5:00  P.M.  (Eastern Standard Time) on March
9, 1995.  Holders of approximately  2.27 million shares of Series A
Stock converted their shares into approximately 6.25 million shares
of Common Stock.  The remaining  holders of 21,000 shares of Series
A Stock were entitled to  receive only the Redemption Price without
additional interest thereon upon  surrender  of  the Series A Stock
certificates properly endorsed to the redemption agent.

Shareholder Rights Plan
-----------------------

On February 24, 1998, the  Board  of  Directors of the Company (the
"Board") adopted  a  Shareholder  Rights  Plan  (the "Rights Plan")
designed to assure that in  the  event of an unsolicited or hostile
attempt  to  acquire  the   Company,   the  Board  would  have  the
opportunity to consider  and  implement  a  course  of action which
would best maximize shareholder value.  Under the Rights Plan, each
shareholder will receive a dividend of  one Right for each share of
the Company's outstanding Common  Stock.   Each Right shall entitle
the holder thereof to purchase 1/500th  of a share of the Company's
Series B Preferred Stock (the "Series B Preferred") for $45.00 (the
"Exercise Price").   Each  1/500th  Series  B  Preferred share (the
"Preferred Fraction") shall be entitled  to one vote in all matters
being voted on by the  holders  of  Common  Stock and shall also be
entitled to a liquidation preference of $0.20.

The Rights will initially be attached to the Company's Common Stock
and will  not  be  exercisable  until  a  shareholder  or  group of
shareholders acting together,  without  the  approval of the Board,
announce their  intent  to  become  a  15%  or  more  owner  in the
Company's Common Stock.  At  that time, certificates evidencing the
Rights shall  be  distributed  to  shareholders,  the  Rights shall
detach from the Common  Stock  and  shall become exercisable.  When
such buyer acquires 15% or more of the Company's Common Stock, all
<PAGE>

Rights holders, except the non-approved  buyer, will be entitled to
acquire an amount of  the  Preferred  Fraction  at  a rate equal to
twice the Exercise Price divided  by  the  then market price of the
Common Stock.  In addition,  if  the  Company is acquired in a non-
approved merger, after  such  an  acquisition,  all Rights holders,
except the aforementioned 15%  or  more  buyer, will be entitled to
acquire stock in the  surviving  corporation  at  a 50% discount in
accordance with the Rights Plan.

The Rights shall attach to all  common shares held by the Company's
shareholders of record as  of  the  close  of business on March 16,
1998.  Shares of Common Stock that are newly-issued after that date
will also carry Rights  until  the  Rights become detached from the
Common Stock.  The rights  will  expire  on February 23, 2008.  The
Company may redeem the Rights  for  $.01  each at any time before a
non-approved buyer acquires  15%  or  more  of the Company's Common
Stock.  Any current holder  that has previously advised the Company
of owning an amount in excess  of 15% of the Company's Common Stock
as of the  date  hereof  has  been  "grandfathered" with respect to
their  current  position,  including  allowance  for  certain small
incremental additions thereto.

Consent Solicitation and Related Matters
----------------------------------------

On March 19, 1998, Paul  R.  Dupee, Jr., a London-based shareholder
representing that he  beneficially  owns  approximately 1.3% of the
Company's  outstanding  stock  ("Dupee"),  filed  preliminary proxy
solicitation materials  (the  "Dupee  Solicitation Materials") with
the Securities Exchange  Commission  (the  "SEC") to obtain written
consents from the Company's  shareholders  to enact three proposals
(the "Dupee Proposals").  The  Dupee  Proposals seek: (1) to repeal
any amendments to the  Company's  Bylaws  (the "Bylaws") adopted by
the  Board  since  February  1,   1998   through  the  end  of  the
solicitation period,  (2)  to  increase  the  authorized  number of
directors of the Company from seven  to seventeen and elect his ten
nominees, including himself,  to  the  Board,  and  to provide that
Article II, Section 14  of  the Bylaws (restricting eligibility for
nomination to the  Board  to  persons  nominated in accordance with
specified procedures) shall not  apply  to  nominees elected to the
Board by written consent of  the Company's shareholders, and (3) to
fill the new directorships  with  a  slate  of nominees proposed by
Dupee (the "Nominees").     In  connection  with  the filing of the
Dupee Solicitation  Materials  with  the  SEC,  Dupee commenced two
legal actions in Delaware.    The  Company  has filed responses and
counterclaims to these  actions  which  are  described  in "Item 3.
Legal Proceedings - a. DUPEE".

The Dupee Solicitation Materials indicate that shareholders holding
approximately an additional 2.4% of the Company's outstanding stock
currently support the Dupee Proposals and related filings.

The Dupee Solicitation materials  indicate that, if successful, the
Nominees will pursue strategic alternatives including the possible
<PAGE>

sale of the Company  or  its  assets.   The materials also indicate
that  Dupee  will   oversee   implementation   of  these  strategic
alternatives and receive  incentive  compensation in an undisclosed
amount.  If successful, Dupee will  also seek to have the costs and
expenses of the proxy filing  and consent solicitation reimburse by
the Company.

The Dupee Solicitation Materials indicate that Dupee was named in a
1971 civil action  by  the  SEC  for  violations  of the anti-fraud
provisions of certain federal  securities laws, including the anti-
fraud provisions of the  Securities  Exchange  Act  of 1934 and the
Securities Act  of  1933.    This  lawsuit  was  resolved  by Dupee
agreeing to a 1973 consent  decree  with the SEC enjoining him from
violations of certain provisions of the federal securities laws.

In order to protect the  Company  and its shareholders from actions
such as the Dupee Proposals, which, among other things, subvert the
protections afforded  by  the  Company's  governing  documents with
respect to  the  staggered  Board  and  shareholder  nominations of
Directors, on  March  28,  1998,  the  Board  amended the following
provisions of the Bylaws of the Company:


        (a) Article III, Section  2  was  amended to require an 80%
stockholders vote,  instead  of  a  majority  stockholders vote, in
order for the stockholders  to  increase  or decrease the number of
authorized directors.

        (b) Article IX, Section  1  was  amended  to require an 80%
stockholder  vote  to  amend  Article  II,  Section  14  (Notice of
Stockholder Business and  Nominations)  and  Article III, Section 2
(Number of Directors) of the  Bylaws.   An 80% stockholder vote was
already required to amend  Article  II,  Section  3 and Article IX,
Sections 1 and 2.  The existing provisions of Article IX, Section 1
required that, if an  action  to  amend  the  Bylaws is proposed by
certain stockholders owning  in  excess  of  10% of the outstanding
Common Stock, in addition  to  any supermajority vote required, the
amendment must also be  approved  by  a majority of the outstanding
voting shares (voting as a single  class) not including such 10% or
more stockholder and his affiliates and associates.  However, if an
action is approved by members  of  the  Board  who are not such 10%
stockholder or his affiliates and associates and who were in office
prior to such person becoming  such  a 10% stockholder or successor
directors chosen by such  directors,  then  only a majority vote of
all voting  shares  (voting  as  a  single  class)  is  required in
addition to any supermajority vote.

The above amendments to  the  Bylaws  will  stay in place until the
close of the 1999  annual  meeting  of stockholders unless prior to
the close of such  annual  meeting  the stockholders representing a
majority of the outstanding  shares  entitled to vote have approved
such amendments. If not so  approved  by the stockholders the above
Sections of the Bylaws will revert back to the language existing on
March 28, 1998, unless otherwise expressly amended after such date.

Under  Delaware  law,  the  Certificate  of  Incorporation  and the
Bylaws, the Board has independent rights to amend the
<PAGE>

Bylaws.  The Board also believes  the amendments to the Bylaws make
them more consistent  with  the  intent  of  the  provisions of the
Company's  Certificate  of  Incorporation,  which  provides  for  a
staggered Board.  Further, the Board believes that these amendments
are necessary in order to  deter  hostile takeover attempts such as
Dupee's while the  Company  is  completing  the  formulation of its
strategic plans and implementing  its strategic initiatives.  While
the Board  firmly  believes  that  the  Bylaws amendments discussed
above are in the best interest  of the Company and its stockholders
and would be upheld by  a  Delaware  Court,  it is possible that in
Dupee's current Delaware state action or in another court action he
could challenge the validity of  the amendments.  If so challenged,
no assurances can be given that such amendments will be upheld.

In addition to the  foregoing,  on  March  28,  1998 the Board also
voted to amend  certain  sections  of  Peter J. Ratician's Restated
Employment  Agreement   and   the   Maxicare   Health  Plans,  Inc.
Supplemental  Executive  Retirement   Program.      For  a  further
discussion of these amendments see "Item 11. Executive Compensation
- Employment Agreements"  and  "Item  11.  Executive Compensation -
Supplemental Executive Retirement Plan".

Employees
---------

As of December  31,  1997,  the  Company employed approximately 540
full-time  employees.    None   of   the  Company's  employees  are
represented by a labor union  or covered by a collective bargaining
arrangement.  The Company believes its employee relations are good.
<PAGE>


Directors and Executive Officers of the Registrant
--------------------------------------------------

The directors and executive officers of the Company at December 31,
1997 were as follows:


     Name                     Age               Position

Peter J. Ratican               54      Chairman of the Board of
                                       Directors, Chief Executive
                                       Officer and President

Richard A. Link                43      Chief Financial Officer,
                                       Executive Vice President -
                                       Finance and Administration

Randall S. Anderson            47      Senior Vice President,
                                       Plan Operations Support

Alan D. Bloom                  51      Senior Vice President,
                                       Secretary and General
                                       Counsel

Aivars L. Jerumanis (a)        58      Senior Vice President,
                                       Management Information
                                       Systems and Chief
                                       Information Officer

Warren D. Foon                 41      Vice President, General
                                       Manager - Maxicare
                                       California

Robert J. Landis               38      Treasurer

Sanford N. Lewis               55      Vice President -
                                       Administrative Services

Vicki F. Perry                 45      Vice President, General
                                       Manager - Maxicare Indiana

Claude S. Brinegar             71      Director

Florence F. Courtright         65      Director

Thomas W. Field, Jr.           64      Director

Eugene L. Froelich (a)         56      Director

Charles E. Lewis, M.D.         69      Director

Alan S. Manne                  72      Director

(a)   See detailed description for current status with Company.
<PAGE>


Peter J. Ratican was appointed  Chairman of the Board of Directors,
Chief Executive Officer  and  President  of  the  Company in August
1988.  He is  a  member  of  the  California Knox-Keene Health Care
Services  Advisory   Committee,   which   assists   the  California
Department  of  Corporations  in  regulating  prepaid  health plans
(HMOs).  Mr.  Ratican  has  been  a  director  of the Company since
August  1983.    He  received  a  Bachelor  of  Science  degree  in
Accounting from the University of  California at Los Angeles and is
a certified public accountant.

Richard A. Link  was  appointed  Chief Financial Officer, Executive
Vice President  -  Finance  and  Administration  of  the Company in
December 1997. Mr.  Link  served  as  Chief  Accounting Officer and
Senior Vice President -  Accounting  of  the Company from September
1988 to December 1997.    He  has  a  Bachelor's degree in Business
Administration from the University of  Southern California and is a
certified public accountant.

Randall S. Anderson, D.D.S., was  appointed Senior Vice President -
Plan Operations Support, in January, 1990.  Dr. Anderson joined the
Company in 1982.  He received  a Bachelor's degree in Finance and a
Doctorate  of  Dental  Surgery  from  the  University  of  Southern
California.

Alan D. Bloom has been Senior Vice President, Secretary and General
Counsel to the  Company  since  July  1987.    Mr. Bloom joined the
Company  as  General  Counsel  in  1981.    Mr.  Bloom  received  a
Bachelor's degree in  Biology  from  the  University  of Chicago, a
Master of Public Health from the University of Michigan, and a J.D.
degree from American University.

Aivars  L.  Jerumanis  was   appointed   Senior  Vice  President  -
Management Information Systems and Chief Information Officer of the
Company in  January  1990.    He  received  a  Masters  in Business
Administration  from    Columbia  University,  a  Masters  in Civil
Engineering from Rensselaer Polytechnic  Institute and a Bachelor's
degree in Civil Engineering from Lafayette College.  Mr. Jerumanis'
employment with the  Company  was  terminated  effective January 5,
1998.

Warren D. Foon was appointed Vice President, General Manager of the
California HMO in May of 1995.   Mr. Foon was Vice President - Plan
Operations of the Company from March  of 1989 through April of 1995
and Vice President -  National  Provider  Relations from October of
1986 through February  of  1989.    Mr.  Foon  received a Doctor of
Pharmacy and a Masters in Public Administration from the University
of Southern California and a  Bachelor  of Arts in Biology from the
University of California at Los Angeles.

Robert J. Landis  has  served  as  Treasurer  of  the Company since
November 1988.  Mr. Landis received a Bachelor's degree in Business
Administration  from  the  University  of  Southern  California,  a
Master's degree in  Business  Administration  from California State
University at Northridge and is a certified public accountant.
<PAGE>


Sanford N.  Lewis  was  appointed  Vice  President - Administrative
Services of the Company in  February  1996.   He was Associate Vice
President - Underwriting from July  1993  to January 1996 and prior
to that National Director Data  Control.    Mr. Lewis has been with
the Company since 1987.

Vicki F. Perry  was  appointed  Vice  President, General Manager of
Maxicare Indiana, Inc.  in  January  1992.    From  January 1990 to
December  1991  she  served  as  Executive  Vice  President  - Plan
Operations of the Company.    Ms.  Perry  has been with the Company
since 1982.  Ms. Perry is a graduate of Indiana University.

Claude S. Brinegar is  the  retired  Vice  Chairman of the board of
directors and Chief Financial  Officer  of Unocal Corporation.  Mr.
Brinegar has been a director of  the Company since June 1991 and is
also a member of  the  board  of  directors  of Conrail, Inc. and a
visiting scholar at Stanford University.

Florence F. Courtright has  been  a  private investor for more than
the last five years and  was  elected  a director of the Company in
November 1993.    She  is  a  founding  Limited  Partner  of Bainco
International Investors, l.p.  and  a  Trustee  of Loyola Marymount
University.  Further, Ms.  Courtright  is  a former co-owner of the
Beverly Wilshire Hotel and the Beverly Hills Hotel.

Thomas W. Field, Jr. has  been  President  of Field & Associates, a
management consulting firm, since  October  1989.  Mr. Field served
as Chairman of the Board of ABCO Markets from December 1991 through
January 1996.  ABCO Markets is  in the grocery business.  Mr. Field
has been a director of  the  Company  since  April 1992.  Mr. Field
also holds directorships at Campbell  Soup Company and Stater Bros.
Markets.

Eugene L. Froelich  served  as  Chief  Financial Officer, Executive
Vice President  -  Finance  and  Administration  and director since
March 1989.  Mr. Froelich  graduated from Adelphi University and is
a certified public accountant.     Mr. Froelich was employed as the
Company's Chief Financial  Officer  and  Executive Vice President -
Finance and Administration through December  11, 1997 on which date
his employment was  terminated.    Effective  January  30, 1998 Mr.
Froelich resigned as a director of the Company.

Charles E. Lewis has  been  a  Professor of Medicine, Public Health
and Nursing at the University  of  California at Los Angeles, since
1970.  As of July 1993, he  was appointed Director of the Center of
Health Promotion and Disease  Prevention.    He  is a member of the
Institute of  Medicine,  National  Academy  of  Sciences  and  is a
graduate of the Harvard  Medical  School  and  of the University of
Cincinnati School of Public Health where he received a Doctorate of
Science degree.  Dr. Lewis is  a  Regent of the American College of
Physicians and a member of the  Board of Commissioners of the Joint
Commission on Accreditation of Health Care Organizations. Dr. Lewis
has been a director of the Company since August 1983.
<PAGE>


Alan S. Manne is currently  a  professor  emeritus and from 1961 to
1992 was a professor of operations research at Stanford University.
He is an author or co-author  of seven books and received his Ph.D.
in economics from Harvard  University.    He is co-organizer of the
International Energy Workshop.   Mr.  Manne  has been a director of
the Company since January 1994.

The Board of Directors  (the  "Board")  is classified into Class I,
Class II and Class III  directors.    Class I directors include Dr.
Lewis and Mr. Brinegar and  they  will  serve until the 2000 annual
meeting  of  stockholders  and  until  their  successors  are  duly
qualified and elected. The Class II directors included Mr. Froelich
and Ms. Courtright.   Mr.  Froelich  resigned  as a director of the
Company effective January  30,  1998.    Ms.  Courtright will serve
until  the  1998  annual  meeting  of  stockholders  and  until her
successor is  duly  qualified  and  elected.    Class III directors
include Mr. Ratican, Mr. Field  and  Mr.  Manne and they will serve
until the  1999  annual  meeting  of  stockholders  and until their
successors are duly qualified  and  elected.   Officers are elected
annually and serve at  the  pleasure  of  the Board, subject to all
rights, if any, under  certain  contracts  of employment (see "Item
11. Executive Compensation").
<PAGE>


Item 2.  Properties
         ----------

The Company's operating facilities are held through leaseholds.  At
December 31, 1997, the  Company leased approximately 222,567 square
feet at  16  locations  with  an  aggregate  current monthly rental
expense of approximately  $190,000.    These  leases have remaining
terms of  up  to  eight  years.    The  Company's leased properties
include  administrative  locations  for   its  HMOs  and  corporate
facilities,  three  pharmacies  in  southern  California  and other
miscellaneous facilities.

In June 1994 the  Company  entered  into  a lease for new corporate
office space in Los Angeles commencing  in that month for a term of
72 months.  The lease is  for approximately 83,000 square feet with
a monthly rental  expense  of  approximately  $80,000 excluding the
Company's percentage  share  of  all  increases  in  the landlord's
operating cost of the building.


<PAGE>

Item 3.  Legal Proceedings
         -----------------

a.  DUPEE

On March 19, 1998, Paul  R.  Dupee, Jr., a London-based shareholder
representing that he  beneficially  owns  approximately 1.3% of the
Company's  outstanding  stock  ("Dupee"),  filed  preliminary proxy
solicitation materials with the  Securities and Exchange Commission
("SEC") to obtain written  consents from the Company's shareholders
to enact three proposals ("Dupee  Proposals").  The Dupee Proposals
seek:  (1)  to  repeal  any  amendments  to  the  Company's  bylaws
("Bylaws") adopted by  the  Company's  Board of Directors ("Board")
since February 1, 1998;  (2)  to  amend  the Bylaws to increase the
number of authorized directors  from  7  to  17 and to provide that
Article II, Section 14 of  the  Bylaws  shall not apply to nominees
elected  to  the  Board   by   written  consent  of  the  Company's
shareholders; and (3) to fill the new directorships with a slate of
nominees proposed by Dupee (the "Amendments").  For a discussion of
the Dupee Proposals and certain amendments to the Bylaws adopted by
the Board see "Item 1.  Business - Consent Solicitation and Related
Matters".   In connection  with  the  filing of the Dupee Proposals
with the SEC, Dupee commenced two actions in Delaware.

On March 19, 1998, Dupee  commenced  an action in the United States
District Court  for  the  District  of  Delaware  captioned Paul R.
Dupee, Jr.  v.  Maxicare  Health  Plans,  Inc.,  for  a declaratory
judgment that the  preliminary  proxy solicitation materials comply
with applicable Federal law and may  not be challenged by the Board
under Rule 14a-9 promulgated by  the  SEC pursuant to Section 14(a)
of  the  Securities  and  Exchange  Act  of  1934  ("District Court
Action"). (Civ. Act. No. 98-127).

In addition to the District  Court  Action, Dupee filed a complaint
on March 19,  1998,  in  the  Court  of  Chancery  of  the State of
Delaware for New Castle  County,  captioned  Paul  R. Dupee, Jr. v.
Maxicare Health Plans, Inc., Claude  S. Brinegar, Charles E. Lewis,
Florence F. Courtright, Thomas  W.  Field,  Jr.  Alan S. Manne, and
Peter J. Ratican, for a  declaratory judgment and injunctive relief
naming  the  Company's   directors   as  defendants  ("State  Court
Action"). (Civ. Act. No. 16274NC).  In the State Court Action Dupee
seeks a  declaratory  judgment  that:  (a)  the  Amendments  can be
enacted by  holders  of  a  majority  of  the Company's outstanding
voting shares ("Majority  Vote");  (b)  the  Board cannot amend the
Bylaws or take other action  to  require approval of the Amendments
by a supermajority  of  the  holders  of  the Company's outstanding
voting shares;  (c)  Article  II,  Section  14  of  the Bylaws only
applies to directors elected at an annual or special meeting of the
Company's shareholders and will not  or  does not apply to nominees
elected  to  the  Board   by   written  consent  of  the  Company's
shareholders; (d) the Board  cannot  enact  any other amendments to
the Bylaws, enact new bylaws or  take any other action to interfere
with, obstruct, undermine, delay,  repeal, or amend the Amendments,
if the Amendments are approved by Majority Vote, and that such
<PAGE>

action  would  be  a   violation   of  the  Bylaws,  the  Company's
Certificate of Incorporation,  Delaware  law  and  a  breach of the
Board's fiduciary duties; and (e) the Rights Plan and in particular
the  provisions  thereof  relating  to  the  rights  of "Continuing
Directors", as such term is defined  in the Rights Plan, is invalid
and unenforceable  under  Delaware  law.  The  Complaint also seeks
preliminary and permanent injunctive relief enjoining the Company's
directors from enforcing or  implementing  the Rights Plan, or from
taking  any  action  that  prevents  newly  elected  directors from
repealing the Rights  Plan  or  any  rights  issued pursuant to the
plan.

The Company believes that the  District and State Court Actions are
entirely without  merit  and  intends  to  vigorously contest these
actions.  As a  result,  on  March  30,  1998, the Company filed an
answer and counterclaim to each  of  the District Court Action (the
"District Court  Counterclaim")  and  the  State  Court Action (the
"State Court Counterclaim").

In the District Court Counterclaim,  the Company has denied each of
the claims and certain of the  factual allegations made by Dupee in
the District Court Action  and  has  challenged the validity of the
preliminary proxy  solicitation  materials  filed  by  Dupee on the
basis that the solicitation does not comply with applicable federal
securities and Delaware law.  In addition, the Company has asserted
that the Dupee consent  solicitation materials are materially false
and misleading and  omit  material  facts  in  violation of Section
14(a) and Rule 14a-9  of  the  Securities  Exchange Act of 1934, as
amended (the "Exchange Act").    Accordingly, the Company has asked
that the District Court (a)  dismiss the District Court Action with
prejudice, (b) issue a declaratory judgment that Dupee is violating
Section 14(a)  and  Rule  14a-9  of  the  Exchange  Act, (c) enjoin
Dupee's  consent  solicitation  and  the  continuing  violation  of
Section 14(a) and Rule 14a-9 of  the  Exchange Act by Dupee and all
those acting in concert  with  him,  and  (d) award the Company the
costs of the suit and such further relief as the District Court may
deem just and proper.

In the State Court Counterclaim, the Company has denied each of the
claims and certain of the factual  allegations made by Dupee in the
State Court Action and has  asked  that State Court (a) dismiss the
State Court Action with prejudice, (b) issue a declaratory judgment
that  under  Article   Sixth   of   the  Company's  Certificate  of
Incorporation, the  Board  has  the  authority  to  adopt, amend or
repeal the Bylaws  and  that  Dupee's  attempt  to alter that right
through an amendment to the  Bylaws  is invalid under Delaware law,
(c) issue a declaratory judgment  that the Dupee Proposals to amend
the Bylaws and  elect  ten  additional  directors are invalid under
Delaware law, (d)  preliminarily  and  permanently enjoin Dupee and
the  other  members  of  his  group  from  taking  any  actions  in
furtherance of illegal and  invalid  attempts  to amend the Bylaws,
and (e) award the Company  the  costs  of the suit and such further
relief as the State Court may deem just and proper.
<PAGE>


b.  FOUNDATION FOR MEDICAL CARE

On February 16, 1996,  The  Foundation  For Medical Care of Central
Illinois  ("Foundation")  commenced  an  action  in  the  State  of
Illinois Circuit Court,  Sangamon  County, captioned The Foundation
For  Medical  Care  of  Central  Illinois  v.  Maxicare  Illinois a
division of Maxicare  Health  Plans  of  the  Midwest,  Inc., for a
declaratory judgment and  a  preliminary  injunction arising out of
the Foundation's  termination  of  a  provider  agreement  with the
Company's Illinois HMO ("Agreement").  (Case  No.  MR0057).  In the
action  the  Foundation  initially  sought  a  declaratory judgment
concerning its obligation to  members  of  the Illinois HMO and the
amount  and  methodology  under  which  the  Foundation  should  be
compensated for the  provision  of  covered  medical services.  The
Foundation  also  sought  a  preliminary  injunction  directing the
Illinois HMO to tender  capitation  payments  to the Foundation and
enjoining the HMO from  renewing  existing subscriber contracts and
enrolling new HMO members  in  the  Springfield area.  The Illinois
HMO filed its answer to the complaint, amended affirmative defenses
and counterclaims on March  26,  1996.    The parties are presently
engaged in discovery.  A trial date has not been set by the Court.

Under an  interim  agreement  between  the  parties, the Foundation
agreed to continue  to  provide  covered  services  to the Illinois
HMO's members and  the  Illinois  HMO  agreed to deposit capitation
payments into a segregated account  and to approve disbursements to
the Foundation from  the  account  for  claims for covered services
provided to the Illinois HMO's  members and adjudicated pursuant to
a fee schedule, with  full  reservation  of the parties' respective
rights.  Pursuant  to  a  partial settlement agreement subsequently
executed by  the  parties,  the  Foundation's  claim for injunctive
relief, the Company's  counterclaim  for tortious interference with
economic advantage,  and  the  Company's  affirmative defenses were
resolved.  The parties further agreed that the value of the covered
services provided  to  certain  HMO  members  during  1996 would be
determined by the Court in a trial.

The capitation payments  deposited  by  the  Illinois  HMO into the
segregated  account  exceed   the   amount   of  claims  Foundation
represented were  incurred  and  payable  by approximately $943,000
("Segregated Balance") as of  March  26,  1998.   The Foundation is
seeking $3.9 million  in  damages  plus  interest  in excess of the
Segregated Balance  and  a  capitation  payment  in the approximate
amount of $139,000.00 plus interest which the Foundation contends
<PAGE>

is unpaid.  The Company  believes that the Foundation's damages are
substantially overstated and that  the  Foundation's damages do not
exceed the Segregated Balance.    Accordingly, the Company does not
believe that resolution of this action will have a material adverse
impact on the Company's operations or financial condition.

c.  OTHER LITIGATION

The Company is a defendant in a number of other lawsuits arising in
the ordinary course of its operations, including cases in which the
plaintiffs assert claims against the  Company or third parties that
assert breach of contract, indemnity or contribution claims against
the Company for malpractice,  negligence,  bad faith in the failure
to pay claims on  a  timely  basis  or  denial of coverage, seeking
compensatory,  fraud,  and,   in  certain  circumstances,  punitive
damages and RICO claims  in  an  indeterminate  amount which may be
material and/or  seeking  other  forms  of  equitable  relief.  The
Company does not believe  that  the ultimate determination of these
cases  will,  either  individually  or  in  the  aggregate,  have a
material adverse effect on the Company's business or operations.

<PAGE>


Item 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

No matter was submitted to  a  vote  of security holders during the
three months ended December 31, 1997.


<PAGE>

                              PART II
                             --------


Item 5.  Market for the Registrant's Common Stock and Related
         ----------------------------------------------------
         Stockholder Matters
         -------------------

(a) Market Information

The Company's  Common  Stock  trades  on  The  Nasdaq  Stock Market
("Nasdaq") under the trading symbol MAXI.

The following table sets  forth  the  high  and low sale prices per
share on Nasdaq.    The  quotations  are interdealer prices without
retail mark-ups, markdowns, or  commissions,  and may not represent
actual transactions.


Common Stock                       Sale Price
                                 ---------------
                                  High     Low
                                 ------   ------
1996    First Quarter            $31.13   $24.13

        Second Quarter           $28.50   $18.88

        Third Quarter            $21.50   $13.50

        Fourth Quarter           $23.63   $18.25

1997    First Quarter            $26.50   $20.00

        Second Quarter           $25.50   $20.00

        Third Quarter            $25.13   $16.94

        Fourth Quarter           $20.00   $ 9.50


(b) Holders

There were 19,387 holders of  record  of the Company's Common Stock
as of December 31, 1997.   As  of such date, the Company held 9,850
shares of Common  Stock  as  disbursing  agent  for  the benefit of
creditors and holders  of  interests  and  equity  claims under the
Reorganization Plan.  These  shares  will  be disbursed pursuant to
the Reorganization Plan or retired by April 1998.


(c) Dividends

The Company has not paid any cash dividends on its Common Stock and
has no current intention of doing so in the foreseeable future (see
"Item 1. Business - Shareholder Rights Plan").


<PAGE>

Item 6. Selected Financial Data
        -----------------------
<TABLE>
<CAPTION>
                                                                At And For The Years Ended December 31,
                                                                ---------------------------------------
(Amounts in thousands except per share and
 membership data)
<S>                                                      <C>        <C>       <C>        <C>        <C>
                                                           1997       1996      1995       1994       1993
                                                         --------   --------  --------   --------   --------
REVENUES................................................ $663,823   $562,765  $477,344   $432,173   $440,186
                                                         --------   --------  --------   --------   --------
EXPENSES
   Health care expenses.................................  630,869    503,006   414,296    379,608    394,721
   Marketing, general and administrative expenses.......   55,702     48,753    43,993     44,084     40,998
   Depreciation and amortization........................      751      1,279     1,245      2,087      4,054
   Litigation and management restructuring charges (1)..   19,000
                                                         --------   --------  --------   --------   --------
TOTAL EXPENSES..........................................  706,322    553,038   459,534    425,779    439,773
                                                         --------   --------  --------   --------   --------
INCOME (LOSS) FROM OPERATIONS...........................  (42,499)     9,727    17,810      6,394        413

   Investment income....................................    7,481      6,528     6,299      3,319      2,636
   Interest expense.....................................      (63)       (97)      (58)       (36)       (32)
                                                         --------   --------  --------   --------   --------
INCOME (LOSS) BEFORE INCOME TAXES ......................  (35,081)    16,158    24,051      9,677      3,017

INCOME TAX BENEFIT......................................               3,267     3,625      3,658      2,571
                                                         --------   --------  --------   --------   --------
NET INCOME (LOSS).......................................  (35,081)    19,425    27,676     13,335      5,588

PREFERRED STOCK DIVIDENDS...............................                                   (5,280)    (5,400)
                                                         --------   --------  --------   --------   --------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS...... $(35,081)  $ 19,425  $ 27,676   $  8,055   $    188
                                                         ========   ========  ========   ========   ========

NET INCOME (LOSS) PER COMMON SHARE (2):
Basic:
  Basic earnings (loss) per common share................ $  (1.96)  $   1.11  $   1.71   $    .78   $    .02
                                                         ========   ========  ========   ========   ========
  Weighted average number of common shares
   outstanding..........................................   17,897     17,520    16,158     10,367     10,025

Diluted:
  Diluted earnings (loss) per common share.............. $  (1.96)  $   1.05  $   1.53   $    .76   $    .02
                                                         ========   ========  ========   ========   ========
  Weighted average number of common and common
   dilutive potential shares outstanding................   17,897     18,415    18,137     17,581     10,025

BALANCE SHEET DATA:
  Total assets.........................................  $167,422   $184,522  $162,836   $128,692   $106,807
  Total indebtedness (3)...............................  $ 86,386   $ 68,276  $ 68,131   $ 63,342   $ 54,422
  Shareholders' equity.................................  $ 81,036   $116,246  $ 94,705   $ 65,350   $ 52,385

MEMBERSHIP DATA:
  Number of members....................................   515,000    423,000   345,000    292,000    308,000


<PAGE>

                                  Notes to Selected Financial Data



(1)   A $16.0 million litigation charge was recorded in  the  first  quarter of 1997 as a result of a
      ruling by the Commonwealth of Pennsylvania Board  of Claims denying any recovery by the Company
      on its claim against  the  Pennsylvania  Department  of  Public  Welfare in connection with the
      operation of a Medicaid managed care program from 1986 through 1989.  A $3.0 million management
      restructuring charge was  recorded  in  the  fourth  quarter  of  1997 for termination expenses
      primarily related to  the  settlement  of  certain  obligations  pursuant  to  the former chief
      financial officer's employment agreement.

(2)   Earnings per share for the  years  ended  December  31,  1996,  1995,  1994, and 1993 have been
      restated as required by  Statement  of  Financial  Accounting  Standards  No. 128 "Earnings per
      Share".

(3)   Includes long-term liabilities of $195, $511, $1,155,  $887  and $504 in 1997, 1996, 1995, 1994
      and 1993, respectively.


</TABLE>
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition
        -----------------------------------------------------------
        and Results of Operations
        -------------------------

The year ended December 31, 1997 compared to the year ended
-----------------------------------------------------------
December 31, 1996.
------------------

The Company reported a net loss of $35.1 million for the year ended
December  31,  1997  after   recording  a  $16.0  million  non-cash
litigation  charge  and  a  $3.0  million  management restructuring
charge.  This compares  to  net  income  of  $19.4 million for 1996
which included a tax benefit  of  $3.3 million. Net loss per common
share on a diluted basis was  $1.96 for 1997 compared to net income
of $1.05 for 1996.

Revenues for the year ended  December  31, 1997 increased by $101.0
million to $663.8  million,  an  increase  of  18.0% as compared to
1996.   This  increase  was  primarily  due  to  a 24.7% membership
increase,  offset  in  part  by  a  16.9%  decline  in  the average
governmental premium revenue PMPM as a  result of the growth in the
lower premium revenue  PMPM  Medicaid  line  of  business and a .8%
decline in the average commercial premium revenue PMPM.  Commercial
premiums  increased  $10.5  million  or  2.3%  to  $457.6  million,
primarily  as  a  result   of   a   3.2%  increase  in  membership.
Governmental premiums increased  $92.6  million  or 85.9% to $200.5
million as a result  of  a  123.9% increase in membership primarily
generated by growth in the  Medicaid line of business in California
and Indiana.

Health  care  expenses  for  the  year  ended  December  31,  1997,
including increases to health care claims reserves in the third and
fourth quarter, increased by  $127.9  million to $630.9 million, an
increase of 25.4% as compared to  1996.   Health care expenses as a
percentage of premium revenues (the "medical loss ratio") increased
5.3 percentage points to 95.9%, primarily as a result of the growth
in the higher medical loss  ratio Medicaid line of business, higher
prescription  drug  costs  and  increases  to  health  care  claims
reserves.

Marketing, general and administrative ("M,G&A") expenses were $55.7
million for the year ended  December  31, 1997 as compared to $48.8
million for 1996.    M,G&A  expenses  decreased  as a percentage of
revenues to 8.4% in 1997 from 8.7% in 1996.

The Company recorded in the  first  quarter of 1997 a $16.0 million
litigation charge as a result  of  a  ruling by the Commonwealth of
Pennsylvania Board of Claims  denying  the  Company recovery on its
receivable of $15.0 million  due  the Company from the Pennsylvania
Department of Public Welfare  and  related litigation costs. A $3.0
million management restructuring charge  was recorded in the fourth
quarter of 1997 for termination expenses primarily related  to the
<PAGE>

settlement of  certain  obligations  pursuant  to  the former chief
financial officer's employment agreement.

Investment income for the year ended December 31, 1997 increased by
$1.0 million to $7.5 million  as  compared to $6.5 million in 1996.
The slight  increase  in  investment  income  was  primarily due to
higher cash and investment balances.

For the  year  ended  December  31,  1997,  the  Company reported a
provision for income taxes of  $61,000 and an offsetting income tax
benefit of $61,000 due to  the  Company increasing its deferred tax
asset  in  accordance   with   Statement  of  Financial  Accounting
Standards No.  109  "Accounting  for  Income  Taxes".   The Company
reported a $3.3  million  income  tax  benefit  for  the year ended
December 31, 1996,  primarily  due  to  the  recognition  of a $4.0
million  tax  benefit  ($3.4   million  recognized  in  the  fourth
quarter).  (See  "Item  8.  Financial  Statements and Supplementary
Data - Note 7 to the Company's Consolidated Financial Statements").

The year ended December 31, 1996 compared to the year ended
-----------------------------------------------------------
December 31, 1995.
------------------

The Company reported net income of $19.4 million for the year ended
December 31, 1996 compared to  $27.7  million for 1995.  Net income
per common share on a  diluted  basis  was $1.05 for the year ended
December 31, 1996 compared to $1.53 for 1995.

For the year ended December 31, 1996, the Company reported revenues
of $562.8 million,  an  increase  of  $85.4  million  or 17.9% when
compared to 1995.   Commercial  premiums increased $38.3 million or
9.4%  to  $447.2  million  as  a  result  of  a  14.7%  increase in
membership primarily in California and Indiana, offset in part by a
5.7% decline  in  the  average  premium  revenue PMPM. Governmental
premiums increased $47.6 million  or  79.0%  to $107.8 million as a
result of an 88.3%  increase  in  membership primarily generated by
growth in the Medicaid line  of business in California and Indiana.
The premium revenue PMPM  for  the  Medicaid  and Medicare lines of
business increased  by  .7%  and  5.8%,  respectively, however, the
average premium revenue PMPM  for governmental premiums declined by
4.9% as a result  of  greater  growth  in the lower premium revenue
PMPM  Medicaid  line  of  business.    Other  Income  includes  the
recording in the  fourth  quarter  of  1996  a  $5.2 million credit
resulting from a  reduction  in  an  estimated distribution payable
pursuant to the Reorganization Plan.

Health  care  expenses,  including  increases  in  estimated claims
payable in the fourth  quarter  of  1996,  increased 21.4% or $88.7
million for the year ended  December  31, 1996 as compared to 1995.
The medical loss ratio increased  2.3 percentage points to 90.6% as
a result of  higher  prescription  drug  costs,  the  effect of the
decline in the average commercial premium revenue PMPM particularly
<PAGE>

in the California HMO, and  the  growth  in the higher medical loss
ratio Medicaid line of business.

M,G&A expenses were $48.8 million  for  the year ended December 31,
1996 as compared to $44.0  million  for  1995.  M,G&A expenses as a
percentage of revenues decreased  from  9.2%  to  8.7% for the year
ended December 31, 1996  as  compared  to  the same period in 1995.
Depreciation and amortization expense  for  the year ended December
31, 1996 remained relatively constant at $1.3 million when compared
to 1995.

Investment income for the year ended December 31, 1996 increased by
$.2 million to  $6.5  million  as  compared  to  1995.   The slight
increase in investment income was  primarily due to larger cash and
investment balances.

The Company reported a $3.3 million income tax benefit for the year
ended December 31, 1996, primarily due to the recognition of a $4.0
million tax benefit ($3.4 million recognized in the fourth quarter)
as a result of  the  Company  increasing  its deferred tax asset in
accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes".  The Company reported a $3.6 million
income tax benefit for the  year ended December 31, 1995, primarily
due to the recognition in the  fourth quarter of a $4.0 million tax
benefit.

Liquidity and Capital Resources

All of MHP's operating subsidiaries are direct subsidiaries of MHP.
The Company's HMOs are federally  qualified and are licensed in the
states where they operate.  Certain of MHP's operating subsidiaries
are subject  to  state  regulations  which  require compliance with
certain statutory  deposit,  dividend  distribution  and  net worth
requirements.  To the extent the operating subsidiaries must comply
with these regulations, they may not have the financial flexibility
to transfer funds to MHP.   MHP's proportionate share of net assets
(after inter-company eliminations) which, at December 31, 1997, may
not be transferred to  MHP  by  subsidiaries  in the form of loans,
advances or cash dividends without the  consent of a third party is
referred to as "Restricted Net  Assets".   Restricted Net Assets of
these operating subsidiaries  were  $37.2  million  at December 31,
1997, with deposit  requirements  and  limitations imposed by state
regulations on  the  distribution  of  dividends representing $12.8
million  and  $11.0   million   of   the   Restricted  Net  Assets,
respectively, and  net  worth  requirements  in  excess  of deposit
requirements and  dividend  limitations  representing the remaining
$13.4 million.    The  Company's  total  Restricted  Net  Assets at
December 31, 1997 were  $37.5  million.    In addition to the $13.4
million in cash, cash equivalents and marketable securities held by
MHP,  approximately  $9.4  million   in  funds  held  by  operating
subsidiaries could be considered  available  for transfer to MHP at
December 31, 1997.   (See  "Item  14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K - Schedule I").
<PAGE>


The operating HMOs currently  pay  monthly  fees to MHP pursuant to
administrative   services   agreements   for   various  management,
financial, legal, computer  and  telecommunications  services.  The
Company believes  that  for  the  foreseeable  future  it will have
sufficient resources  to  fund  ongoing  operations  and  remain in
compliance with statutory financial requirements.

The Company is in the  process  of upgrading its current management
information systems to address and  recognize the year 2000.  These
system upgrades have been partially completed through December 1997
and are expected to  be  implemented  by  the  end of 1998 or early
1999.  Implementation costs  are  expensed  as incurred and are not
expected to have a  material  impact  on the Company's consolidated
financial position, results of operations or cash flows.

With a  current  ratio  (i.e.,  current  assets  divided by current
liabilities)  of  1.75   and   less   than  $200,000  of  long-term
liabilities at December 31, 1997, the Company does not believe that
it  will  need  additional  working  capital  to  fund  its current
operations for the  foreseeable  future.    However, the Company is
presently  pursuing  obtaining  a   committed  line  of  credit  to
supplement its working capital.  Although the Company believes that
it will be able  to  secure  a  committed  line  of credit or raise
additional working capital  through  either  an equity offering, or
borrowings if it  so  desired,  the  Company  cannot state with any
degree of certainty at this  time whether additional equity capital
or working capital will be available to it, and if available, would
be at terms and conditions acceptable to the Company.

Forward Looking Information

General - This Annual Report on Form 10-K contains and incorporates
by reference forward  looking  statements  within the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
Reference is made in particular  to  the discussion set forth under
"Item 1. Business" and  under  "Item 7. Management's Discussion and
Analysis of Financial Condition  and  Results of Operations".  Such
statements  are   based   on   certain   assumptions   and  current
expectations that involve a number of risks and uncertainties, many
of which  are  beyond  the  Company's  control.    These  risks and
uncertainties include limitations  on  premium levels, greater than
anticipated increases  in  healthcare  expenses,  benefit mandates,
variances in anticipated enrollment  as  a result of competition or
other factors, changes  to  the  laws  or  funding  of Medicare and
Medicaid  programs,  and   increased   regulatory  requirements  of
dividending, minimum capital, reserve  and other financial solvency
requirements.  These  statements  are  forward  looking  and actual
results could differ materially from those projected in the forward
looking   statements,   which    statements   involve   risks   and
uncertainties.   In  addition,  past  financial  performance is not
necessarily  a  reliable   indicator   of  future  performance  and
investors should not use historical performance to anticipate
<PAGE>

results or future period trends.  Shareholders are also directed to
disclosures in this and other  documents  filed by the Company with
the SEC.

Business  Strategy  -  The  Company's  business  strategy  includes
strengthening its position in the  markets it serves by:  marketing
an expanded range of managed  care products and services, providing
superior service  to  the  Company's  members  and employer groups,
enhancing long-term relationships and arrangements with health care
providers, and  selectively  targeting  geographic  areas  within a
state for expansion through increased penetration or development of
new areas.    The  Company  continually  evaluates opportunities to
expand its business as  well  as  evaluates the investment in these
businesses.     In   December   1997,   the   Company  undertook  a
restructuring of management  and  commenced  a re-evaluation of the
Company's operations and businesses  with  a view towards enhancing
the Company's operations and  focusing  on the Company's operations
which have generated substantially all of the membership growth and
profits in recent years.  For  the year ended December 31, 1997 the
Company reported a net loss of $35.1 million which included a $16.0
million non-cash litigation  charge  and  a $3.0 million management
restructuring charge.  Excluding  these  charges, the Company would
have reported a  net  loss  of  $16.1  million  which was virtually
entirely due to  losses  reported  for  the  Company's Illinois and
Carolinas health plans.    The  Company  is currently reviewing and
pursuing strategic alternatives with respect to these and its other
health plans which may include  dispositions and or acquisitions in
support of the Company's business strategy.
<PAGE>


Item 8. Financial Statements and Supplementary Data
        -------------------------------------------

<PAGE>



                  REPORT OF INDEPENDENT AUDITORS
                  ------------------------------



The Board of Directors and Shareholders
Maxicare Health Plans, Inc.


We have audited  the  accompanying  consolidated  balance sheets of
Maxicare Health Plans, Inc. as  of  December 31, 1997 and 1996, and
the  related  consolidated  statements  of  operations,  changes in
shareholders' equity and cash flows for  each of the three years in
the period ended December 31,  1997.   Our audits also included the
information  with  respect  to  the  financial  statement schedules
listed in the index at item  14(a).  These financial statements and
schedules are the responsibility of  the Company's management.  Our
responsibility  is  to  express   an  opinion  on  these  financial
statements and schedules based on our audits.

We conducted  our  audits  in  accordance  with  generally accepted
auditing standards.    Those  standards  require  that  we plan and
perform the audit to obtain  reasonable assurance about whether the
financial statements are free  of  material misstatement.  An audit
includes  examining,  on  a  test  basis,  evidence  supporting the
amounts and disclosures in the financial statements.  An audit also
includes assessing the  accounting  principles used and significant
estimates made by  management,  as  well  as evaluating the overall
financial statement  presentation.    We  believe  that  our audits
provide a reasonable basis for our opinion.

In our opinion, the financial  statements referred to above present
fairly,  in  all  material  respects,  the  consolidated  financial
position of Maxicare Health  Plans,  Inc.  at December 31, 1997 and
1996, and the consolidated results  of  its operations and its cash
flows for each of the three  years in the period ended December 31,
1997 in conformity  with  generally accepted accounting principles.
Also, in our  opinion,  the  related financial statement schedules,
when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information
set forth therein.





                                   ERNST & YOUNG LLP


Los Angeles, California
February 6, 1998, except Note 5
which date is February 28, 1998


<PAGE>

                MAXICARE HEALTH PLANS, INC.
                CONSOLIDATED BALANCE SHEETS
          (Amounts in thousands except par value)

<TABLE>
<CAPTION>

                                                                   December 31,
                                                                1997         1996
                                                             ---------    ---------
<S>                                                          <C>          <C>
  Cash and cash equivalents - Note 2........................ $  51,881    $  55,568
  Marketable securities - Note 2............................    47,843       58,650
  Accounts receivable, net - Note 2.........................    26,024       33,107
  Deferred tax asset - Note 7...............................    18,061       18,000
  Prepaid expenses..........................................     6,763        3,001
  Other current assets......................................       653          279
                                                             ---------    ---------
    TOTAL CURRENT ASSETS....................................   151,225      168,605
                                                             ---------    ---------
PROPERTY AND EQUIPMENT
  Leasehold improvements....................................     5,441        5,441
  Furniture and equipment...................................    18,135       18,875
                                                             ---------    ---------
                                                                23,576       24,316
    Less accumulated depreciation and amortization..........    22,330       22,875
                                                             ---------    ---------
    NET PROPERTY AND EQUIPMENT..............................     1,246        1,441
                                                             ---------    ---------
LONG-TERM ASSETS
  Long-term receivables.....................................       509          109
  Restricted investments - Note 2...........................    14,135       14,099
  Intangible assets, net....................................       307          268
                                                             ---------    ---------
    TOTAL LONG-TERM ASSETS..................................    14,951       14,476
                                                             ---------    ---------

    TOTAL ASSETS............................................ $ 167,422    $ 184,522
                                                             =========    =========
CURRENT LIABILITIES
  Estimated claims and other health care costs payable...... $  67,334    $  52,294
  Accounts payable..........................................       528          711
  Deferred income...........................................     7,220        7,234
  Accrued salary expense....................................     3,304        3,376
  Other current liabilities.................................     7,805        4,150
                                                             ---------    ---------
    TOTAL CURRENT LIABILITIES...............................    86,191       67,765
LONG-TERM LIABILITIES.......................................       195          511
                                                             ---------    ---------
    TOTAL LIABILITIES.......................................    86,386       68,276
                                                             ---------    ---------
COMMITMENTS AND CONTINGENCIES - Note 4

SHAREHOLDERS' EQUITY
  Common stock, $.01 par value - 40,000 shares authorized,
    1997 - 17,936 shares and 1996 - 17,565 shares issued and
    outstanding - Note 5....................................       179          176
  Additional paid-in capital................................   254,376      249,804
  Notes receivable from shareholders - Note 6...............    (4,704)
  Accumulated deficit.......................................  (168,815)    (133,734)
                                                             ---------    ---------

    TOTAL SHAREHOLDERS' EQUITY..............................    81,036      116,246
                                                             ---------    ---------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 167,422    $ 184,522
                                                             =========    =========



                      See notes to consolidated financial statements.


</TABLE>
<PAGE>

                  MAXICARE HEALTH PLANS, INC.
              CONSOLIDATED STATEMENTS OF OPERATIONS
          (Amounts in thousands except per share data)


<TABLE>
<CAPTION>

                                                           Years ended December 31,
                                                         1997       1996       1995
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>                                <C>
REVENUES
   Commercial premiums................................ $457,628   $447,151   $408,901
   Governmental premiums..............................  200,452    107,819     60,233
   Other income.......................................    5,743      7,795      8,210
                                                       --------   --------   --------
     TOTAL REVENUES...................................  663,823    562,765    477,344
                                                       --------   --------   --------
EXPENSES
   Physician services.................................  267,604    221,259    183,918
   Hospital services..................................  244,540    188,227    148,546
   Outpatient services................................  101,854     79,403     67,482
   Other health care expense..........................   16,871     14,117     14,350
                                                       --------   --------   --------
     TOTAL HEALTH CARE EXPENSES.......................  630,869    503,006    414,296

   Marketing, general and administrative expenses.....   55,702     48,753     43,993
   Depreciation and amortization......................      751      1,279      1,245
   Litigation and management restructuring
    charges - Note 9..................................   19,000
                                                       --------   --------   --------
     TOTAL EXPENSES...................................  706,322    553,038    459,534
                                                       --------   --------   --------
INCOME (LOSS) FROM OPERATIONS.........................  (42,499)     9,727     17,810

   Investment income..................................    7,481      6,528      6,299
   Interest expense...................................      (63)       (97)       (58)
                                                       --------   --------   --------
INCOME (LOSS) BEFORE INCOME TAXES.....................  (35,081)    16,158     24,051

INCOME TAX BENEFIT....................................               3,267      3,625
                                                       --------   --------   --------
NET INCOME (LOSS)..................................... $(35,081)  $ 19,425   $ 27,676
                                                       =========  ========   ========

NET INCOME (LOSS) PER COMMON SHARE
   - Note 2:

Basic:
  Basic Earnings (Loss) Per Common Share.............. $  (1.96)  $   1.11   $   1.71
                                                       ========   ========   ========
  Weighted average number of common shares
   outstanding........................................   17,897     17,520     16,158
                                                       ========   ========   ========

Diluted:
  Diluted Earnings (Loss) per Common Share............ $  (1.96)  $   1.05   $   1.53
                                                       ========   ========   ========
  Weighted average number of common and common
     dilutive potential shares outstanding............   17,897     18,415     18,137
                                                       ========   ========   ========





                      See notes to consolidated financial statements.


</TABLE>
<PAGE>

                  MAXICARE HEALTH PLANS, INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                      Years ended December 31,
                                                                    1997        1996        1995
                                                                  --------    --------    --------
<S>                                                               <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................ $(35,081)   $ 19,425    $ 27,676
Adjustments to reconcile net income (loss) to net cash provided
by (used for) operating activities:
  Depreciation and amortization..................................      751       1,279       1,245
  Benefit from deferred income taxes.............................      (61)     (4,000)     (4,000)
  Amortization of restricted stock...............................      426         699         583
  Provision for long-term receivables valuation allowance........                            2,004
  Litigation and management restructuring charges................   19,000
  Changes in assets and liabilities:
    Increase in accounts receivable..............................   (7,917)       (161)    (14,632)
    Increase (decrease) in estimated claims and other health
      care costs payable.........................................   15,040       5,280        (446)
    Increase (decrease) in deferred income.......................      (14)      1,962       2,934
    Changes in other miscellaneous assets and liabilities........   (4,303)     (8,511)      2,928
                                                                  --------    --------    --------
Net cash provided by (used for) operating activities.............  (12,159)     15,973      18,292
                                                                  --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Dispositions of property and equipment.........................                                5
  Purchases of property and equipment............................     (301)        (81)       (250)
  Increase in restricted investments.............................      (36)     (1,506)     (1,640)
  Reductions to long-term receivables............................                   91          81
  Additions to long-term receivables.............................     (400)
  Proceeds from sales and maturities of marketable securities....   52,946      51,495      48,460
  Purchases of marketable securities.............................  (42,139)    (60,486)    (54,561)
  Loans to shareholders..........................................   (4,458)
                                                                  --------    --------    --------
Net cash provided by (used for) investing activities.............    5,612     (10,487)     (7,905)
                                                                  --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligations..........................     (384)       (505)       (171)
  Stock options exercised........................................    3,613       1,417       1,621
  Repurchase of restricted stock.................................     (369)
  Redemption of preferred stock..................................                             (525)
                                                                  --------    --------    --------
Net cash provided by financing activities........................    2,860         912         925
                                                                  --------    --------    --------
Net increase (decrease) in cash and cash equivalents.............   (3,687)      6,398      11,312
Cash and cash equivalents at beginning of year...................   55,568      49,170      37,858
                                                                  --------    --------    --------
Cash and cash equivalents at end of year......................... $ 51,881    $ 55,568    $ 49,170
                                                                  ========    ========    ========

Supplemental disclosures of cash flow information:
    Cash paid during the year for -
      Interest................................................... $     57    $    106    $     37
      Income taxes............................................... $    100    $    347    $  2,689

Supplemental schedule of non-cash investing activities:
    Capital lease obligations incurred for purchase of property
      and equipment and intangible assets........................ $    150                $    963

Supplemental schedule of non-cash financing activities:
    Reclassification of preferred stock capital accounts
      to common stock capital accounts pursuant to the
      conversion of preferred stock to common stock..............                         $ 53,195
    Issuance of restricted stock.................................                         $  2,096




                          See notes to consolidated financial statements.


</TABLE>
<PAGE>

                    MAXICARE HEALTH PLANS, INC.
     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                       (Amounts in thousands)



<TABLE>
<CAPTION>

  <S>                             <C>       <C>        <C>        <C>
  <C>                             <C>       <C>        <C>
                                  Number of            Number of          Additional
                                  Preferred Preferred   Common    Common   Paid-in             Accumulated
                                   Shares     Stock     Shares     Stock   Capital     Other     Deficit     Total
                                  --------  ---------  ---------  ------  ----------  -------  ----------- --------

Balances at December 31, 1994....   2,290     $   23    10,850     $108    $246,054            $(180,835)  $ 65,350

  Stock options exercised......                            189        2       1,619                           1,621

  Restricted stock issued......                            130        1          (1)

  Restricted stock amortized...                                                 583                             583

  Preferred stock converted
  to common stock................  (2,269)       (23)    6,251       63         (40)

  Preferred stock redeemed.....       (21)                                     (525)                           (525)

  Net income...................                                                                   27,676     27,676
                                    -----      -----    ------     ----   ---------   -------  ---------    -------

Balances at December 31, 1995....       0          0    17,420      174     247,690             (153,159)    94,705

  Stock options exercised......                            145        2       1,415                           1,417

  Restricted stock amortized...                                                 699                             699

  Net income...................                                                                   19,425     19,425
                                    -----      -----    ------     ----   ---------   -------  ---------    -------
Balances at December 31, 1996....       0          0    17,565      176     249,804             (133,734)   116,246


  Stock options exercised......                            403        4       3,609                           3,613

  Restricted stock amortized...                                                 426                             426

  Retirement of restricted
  stock..........................                          (32)      (1)       (368)                           (369)

  Adjustment to paid-in capital
  for deferred compensation......                                               905                             905

  Notes receivable from
  shareholders...................                                                     $(4,704)               (4,704)

  Net loss.....................                                                                  (35,081)   (35,081)
                                    -----      -----    ------     ----    --------   -------  ---------   --------

Balances at December 31, 1997....       0      $   0    17,936     $179    $254,376   $(4,704) $(168,815)  $ 81,036
                                    =====      =====    ======     ====    ========   =======  =========   ========





                               See notes to consolidated financial statements.

</TABLE>
<PAGE>

                   MAXICARE HEALTH PLANS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - BUSINESS DESCRIPTION

Maxicare Health Plans, Inc.,  a  Delaware corporation ("MHP"), is a
holding company which  owns  various subsidiaries, primarily health
maintenance   organizations   ("HMOs").   MHP   operates   HMOs  in
California, Indiana,  Illinois,  Louisiana,  North  Carolina, South
Carolina and Wisconsin.  All  of MHP's HMOs are federally qualified
by the United States  Department  of  Health and Human Services and
are generally regulated by the Department of Insurance of the state
in which they are  domiciled  (except  the California HMO, which is
regulated by the California Department of Corporations).

Maxicare Life  and  Health  Insurance  Company  ("MLH"), a licensed
insurance company  and  wholly-owned  subsidiary  of  MHP, operates
preferred provider  organizations  ("PPOs")  in  Illinois, Indiana,
Louisiana,  North   Carolina   and   California   which  constitute
approximately  1%  of  the   consolidated  enrollment  of  MHP  and
subsidiaries (the "Company") at  December  31,  1997.  In addition,
MLH  writes  policies  for  group  life  and  accidental  death and
dismemberment insurance; however, these  lines  of business make up
less than 1% of the Company's  revenues for the year ended December
31, 1997.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The  accompanying  consolidated  financial  statements  include the
accounts of the Company.  All significant intercompany balances and
transactions have been eliminated.

Use of Estimates

The  preparation  of  the   consolidated  financial  statements  in
conformity with generally  accepted  accounting principles requires
management  to  make  estimates  and  assumptions  that  affect the
amounts  reported  in  the  consolidated  financial  statements and
accompanying  notes.    Actual  results  could  differ  from  these
estimates.

Cash and Cash Equivalents

The Company considers all  highly  liquid investments that are both
readily convertible into known amounts of cash and mature within 90
days from their date of purchase to be cash equivalents.
<PAGE>


Cash and cash equivalents consist of the following at December 31:

                                        1997        1996
  (Amounts in thousands)              -------     -------
  Cash..............................  $ 6,379     $ 5,378
  Certificates of deposit...........    6,552       8,163
  Commercial paper..................    3,191      13,535
  Money market funds................    9,403       9,787
  Repurchase agreements.............    8,783       3,258
  U.S. Government obligations.......   15,533      15,447
  Corporate notes...................    2,040
                                      -------     -------
                                      $51,881     $55,568
                                      =======     =======


Investments

Realized gains and losses and  unrealized losses judged to be other
than temporary  with  respect  to  available-for-sale  and held-to-
maturity  securities  are  included  in  the  determination  of net
income.  The  cost  of  securities  sold  is  based on the specific
identification method.   Fair  values  of marketable securities are
based on published or quoted market prices.

The Company has  designated  its  marketable securities included in
current assets as  available-for-sale.    Such securities have been
recorded at amortized cost as  the  unrealized gain or loss in such
securities is immaterial.

The  Company's   restricted   investments   consist  of  securities
restricted to specific purposes as required by various governmental
regulations.  These  securities  have  been  designated as held-to-
maturity as the Company has the intent and the ability to hold them
to maturity.  These securities are stated at amortized cost.

During 1997, the Company  sold  marketable securities having a book
value of $15.9 million, realizing a net gain of $178,000.

<PAGE>

The following is a  summary  of  investments  at December 31 (gross
unrealized gains and losses are immaterial):
<TABLE>
<CAPTION>


<S>                             <C>          <C>           <C>           <C>
                                        1997                        1996
                                ----------------------     -----------------------
                                             Estimated                   Estimated
                                Amortized      Fair        Amortized       Fair
(Amounts in thousands)            Cost         Value         Cost          Value
                                ---------    ---------     ---------     ---------
Available-for-sale:
  U.S. Government obligations..  $45,585      $45,603       $48,467       $48,354

  Corporate notes..............    2,232        2,252         9,632         9,700

  Other........................       26           26           551           564
                                 -------      -------       -------       -------
                                 $47,843      $47,881       $58,650       $58,618
                                 =======      =======       =======       =======
Held-to-maturity:
  U.S. Government obligations..  $11,159      $11,176       $10,974       $10,991

  Corporate notes..............      101          101

  Other........................    2,875        2,875         3,125         3,125
                                 -------      -------       -------       -------
                                 $14,135      $14,152       $14,099       $14,116
                                 =======      =======       =======       =======
</TABLE>

The contractual maturities of investments at December 31, 1997 were
as follows:

                                                      Estimated
                                          Amortized     Fair
(Amounts in thousands)                      Cost        Value
                                          ---------   ---------
Available-for-sale:
  Due in one year or less................  $10,812     $10,854

  Due after one year through five years..   37,031      37,027
                                           -------     -------
                                           $47,843     $47,881
                                           =======     =======

Held-to-maturity:
  Due in one year or less...............   $13,458     $13,477

  Due after one year through five years..      677         675
                                           -------     -------
                                           $14,135     $14,152
                                           =======     =======



<PAGE>

Accounts Receivable

Accounts receivable consisted of the following at December 31:


                                            1997        1996
  (Amounts in thousands)                  -------     -------
  Premiums receivable.................... $28,563     $33,330
  Allowance for retroactive
    billing adjustments..................  (6,926)     (5,112)
                                          -------     -------
  Premiums receivable, net...............  21,637      28,218

  Other..................................   4,387       4,889
                                          -------     -------
  Accounts receivable, net............... $26,024     $33,107
                                          =======     =======

Premiums receivable included as  of  December 31, 1996 an estimated
$15.0 million for amounts due the Company with respect to the prior
operation of a  governmental  managed  care  program of which $10.0
million was recorded as  Other  Income  for the year ended December
31, 1995.  This receivable  was  written  off by the Company in the
first quarter of 1997 in conjunction  with the recording of a $16.0
million litigation charge.

Property and Equipment

Property and equipment  are  recorded  at  cost  and include assets
acquired through capital leases and improvements that significantly
add to the productive capacity  or  extend  the useful lives of the
assets.  Costs of maintenance and repairs are charged to expense as
incurred. Depreciation for financial reporting purposes is provided
on the straight-line method over  the estimated useful lives of the
assets.    The  costs  of  major  remodeling  and  improvements are
capitalized as leasehold improvements.   Leasehold improvements are
amortized using the straight-line  method  over  the shorter of the
remaining term of the applicable lease or the life of the asset.

Intangible Assets

Intangible assets consist primarily  of purchased computer software
and are amortized using  the  straight-line method over five years.
Accumulated amortization of intangible  assets at December 31, 1997
and 1996 is $2.0 million and $1.8 million, respectively.

Revenue Recognition

Premiums are recorded as revenue  in  the month for which enrollees
are entitled  to  health  care  services.    Premiums  collected in
advance are deferred.  A portion of premiums is subject to possible
retroactive adjustment.    Provision  has  been  made for estimated
retroactive adjustments to the extent  the probable outcome of such
adjustments can be determined.    Any other revenues are recognized
as services are rendered.

<PAGE>

Health Care Expense Recognition

The cost of health  care  services  is  expensed  in the period the
Company is obligated to provide  such services.  The Company's HMOs
arrange for the provision of health care services primarily through
capitation arrangements.  Under  capitation contracts, the HMO pays
the health care provider  a  fixed  amount  per member per month to
cover the payment of  all  or  most  medical services regardless of
utilization.      Where   the   Company   retains   the   financial
responsibility for specialist  referrals,  hospital utilization and
other health care  costs,  the  Company  establishes an accrual for
estimated  claims  payable  including  claims  reported  as  of the
balance sheet date and estimated (based upon utilization trends and
projections  of  historical  developments)  costs  of  health  care
services rendered but not  reported.   Estimated claims payable are
continually monitored and reviewed and,  as settlements are made or
accruals adjusted, differences are reflected in current operations.

Insurance

The Company's operating entities,  except  in North Carolina, South
Carolina and  California,  are  self-insured  for  risks on certain
medical and hospital claims incurred  by  their members.  The North
Carolina and  South  Carolina  HMOs  maintain  medical and hospital
claims reinsurance coverage with MLH.  The California HMO maintains
medical  and  hospital  claims  reinsurance  coverage  for  its Los
Angeles County Medicaid line of business with Health Care Assurance
Company Limited ("HCAC"), a wholly-owned subsidiary of MHP.

In addition, the Company's  operating entities are self-insured for
medical malpractice claims  with  the  exception  of the California
HMO, which maintains malpractice coverage through HCAC.

Premium Deficiencies

Estimated future health care costs and maintenance expenses under a
group of  contracts  in  excess  of  estimated  future premiums and
reinsurance recoveries on those  contracts  are  recorded as a loss
when determinable.   No  such  deficiencies  exist  at December 31,
1997.

Net Income Per Common Share

Effective December  15,  1997  the  Company  was  required to adopt
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  128
"Earnings per Share".   SFAS  No.  128 requires the presentation of
"basic earnings per share"  (which  excludes dilution) and "diluted
earnings per share" as replacements  for primary earnings per share
and fully diluted earnings per  share.  Restatement of all earnings
per share calculations  presented  in  the  financial statements is
required by SFAS No. 128.

<PAGE>

Basic  earnings  per  share  is  computed  by  dividing  net income
available to common shareholders by  the weighted average number of
common  shares  outstanding.     Common   shares  issued  upon  the
conversion of preferred stock  have  been  included in the weighted
average number  of  common  shares  outstanding  subsequent  to the
conversion date.

Diluted earnings per share  is  computed  by dividing net income by
the weighted average  number  of  common  shares outstanding, after
giving effect to stock options with an exercise price less than the
average market price for the period and shares assumed to be issued
upon conversion of the  Company's  preferred  stock.  Common shares
issued upon the conversion of preferred stock have been included in
the weighted average number  of  common  shares outstanding and the
preferred shares  have  been  excluded  from  the  weighted average
number of common  equivalent  shares  outstanding subsequent to the
conversion date.

The  following  is   a   reconciliation   of   the  numerators  and
denominators used in the calculation  of basic and diluted earnings
per share for each period presented in the financial statements:
<TABLE>
<CAPTION>


<S>                                                 <C>          <C>         <C>
                                                         Years ended December 31,
                                                      1997         1996        1995
                                                    --------     --------    --------

Basic earnings (loss) per common share:

Numerator - Net income (loss).....................  $(35,081)    $ 19,425    $ 27,676
                                                    ========     ========    ========
Denominator -
  Weighted average number of common shares
    outstanding....................................   17,897       17,520      16,158
                                                    ========     ========    ========

Basic earnings (loss) per common share............. $  (1.96)    $   1.11    $   1.71
                                                    ========     ========    ========


Diluted earnings (loss) per common share:

Numerator - Net income (loss)...................... $(35,081)    $ 19,425    $ 27,676
                                                    ========     ========    ========
Denominator -
  Weighted average number of common shares
    outstanding....................................   17,897       17,520      16,158
  Dilutive stock options...........................                   895         820
  Dilutive impact of preferred stock
    outstanding through March 14, 1995.............                             1,159
                                                    --------     --------    --------
                                                      17,897       18,415      18,137
                                                    ========     ========    ========

Diluted earnings (loss) per common share........... $  (1.96)    $   1.05    $   1.53
                                                    ========     ========    ========


Stock options are excluded  from  the  calculation  of  diluted  loss  per share for 1997
because the inclusion of stock options would have an anti-dilutive effect.
</TABLE>
<PAGE>


Stock Options

In October  1995,  SFAS  No.  123  "Accounting  for  Stock - Based
Compensation"  was  issued   which   provides  an  alternative  to
Accounting Principles Board ("APB") Opinion No. 25 "Accounting for
Stock Issued to Employees".  SFAS No. 123 encourages, but does not
require, that  compensation  expense  for  grants  of stock, stock
options and other equity instruments  to employees be based on the
fair  value  of  such  instrument.    The  Statement  also  allows
companies to continue  to  measure  compensation expense using the
intrinsic value method  prescribed  by  APB  Opinion  No. 25.  The
Company has elected  to  continue  with  the intrinsic value based
method.

With respect to stock options  granted  at an exercise price which
is less than the  fair  market  value  on  the  date of grant, the
difference between the option  exercise  price and market value at
date of grant is charged to operations over the period the options
vest.   Income  tax  benefits  attributable  to  stock options are
credited to Additional Paid-in Capital when exercised.

Restrictions on Fund Transfers

Certain of the  Company's  operating  subsidiaries  are subject to
state regulations which require  compliance with certain statutory
deposit, dividend distribution and net worth requirements.  To the
extent  the  operating   subsidiaries   must   comply  with  these
regulations,  they  may  not  have  the  financial  flexibility to
transfer funds to MHP.    MHP's  proportionate share of net assets
(after inter-company eliminations)  which,  at  December 31, 1997,
may not be  transferred  to  MHP  by  subsidiaries  in the form of
loans, advances or cash dividends  without  the consent of a third
party is referred to  as  "Restricted  Net Assets". Restricted Net
Assets of  these  operating  subsidiaries  were  $37.2  million at
December  31,  1997,  with  deposit  requirements  and limitations
imposed by  state  regulations  on  the  distribution of dividends
representing $12.8 million and $11.0 million of the Restricted Net
Assets, respectively,  and  net  worth  requirements  in excess of
deposit and dividend limitations  representing the remaining $13.4
million.  The Company's  total  Restricted  Net Assets at December
31, 1997 were $37.5 million.   In addition to the $13.4 million in
cash, cash  equivalents  and  marketable  securities  held by MHP,
approximately $9.4 million in funds held by operating subsidiaries
could be considered available for  transfer to MHP at December 31,
1997.

Reclassifications

Certain amounts for 1996 have  been reclassified to conform to the
1997 presentation.

Concentrations of Credit Risk

Financial instruments  which  potentially  subject  the Company to
concentrations of credit risk consist primarily of investments in
<PAGE>

marketable securities  and  premiums  receivable.    The Company's
investments  in  marketable  securities  are  managed  by internal
investment managers within the guidelines established by the Board
of Directors, which,  as  a  matter  of  policy, limit the amounts
which may be invested in any one issuer.  Concentrations of credit
risk with respect to  premiums  receivable  are limited due to the
large number of employer  groups comprising the Company's customer
base.   As  of  December  31,  1997  management  believes that the
Company had no significant concentrations of credit risk.

NOTE 3 - LITIGATION

The Company is involved in litigation arising in the normal course
of business, which, in the opinion  of management, will not have a
material adverse effect  on  the  Company's consolidated financial
position or results of operations.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

Leases

The Company  has  operating  leases,  some  of  which  provide for
initial free rent and  all  of  which  provide for subsequent rent
increases.  Rental expense is  recognized on a straight-line basis
with rental expense of $2.3 million, $2.4 million and $2.5 million
reported for the years  ended  December  31,  1997, 1996 and 1995,
respectively.  Sublease rental revenue  of $72,000 is reported for
the year ended December 31, 1995.

Assets held under capital leases at  December 31, 1997 and 1996 of
$696,000  and  $872,000,  respectively,  (net  of  $1,043,000  and
$749,000, respectively, of accumulated amortization) are comprised
primarily of equipment leases.    Amortization expense for capital
leases is included in depreciation expense.

Future  minimum  lease  commitments  for  noncancelable  leases at
December 31, 1997 were as follows:

                                        Operating  Capitalized
                                         Leases      Leases
         (Amounts in thousands)         ---------  -----------
         1998..........................  $2,446       $375
         1999..........................   2,001         53
         2000..........................     996         15
         2001..........................     776         15
         2002..........................     639         11
         Thereafter....................     579
                                         ------       ----
         Total minimum
           obligations.................  $7,437        469
                                         ======

         Less current
           obligations.................                375
         Long-term                                    ----
           obligations.................               $ 94
                                                      ====
<PAGE>

NOTE 5 - CAPITAL STOCK

On March 9,  1992  the  shareholders  voted  to amend MHP's current
Restated Certificate of  Incorporation  to  increase the authorized
Capital Stock of  the  Company  from  18.0  million  shares to 45.0
million shares through: (i) an increase in the amount of authorized
Common Stock of  the  Company,  par  value  $.01, from 18.0 million
shares to 40.0 million  shares,  and  (ii) the authorization of 5.0
million shares of Preferred  Stock,  par  value  $.01, of which 2.5
million shares were designated the Series A Stock.

Preferred Stock

In the first quarter of 1992  MHP issued 2,400,000 shares of Series
A Cumulative Convertible Preferred Stock (the "Series A Stock") and
redeemed  certain  Senior  Notes  issued  in  conjunction  with the
Company's  joint   plan   of   reorganization,   as  modified  (the
"Reorganization Plan").

On February 13, 1995 the Company announced that it would redeem all
of its 2.29 million  outstanding  shares  of  the Series A Stock on
March 14, 1995.  Holders of  Series A Stock were entitled to either
have their shares redeemed  by  the  Company  at $25.4625 per share
(the "Redemption Price"), which  represents the redemption price of
$25.00 per share plus  accrued  and  unpaid dividends of $.4625 per
share, or convert their Series  A  Stock  into 2.7548 shares of the
Company's Common Stock for each  share of Series A Stock converted.
Holders of approximately  2.27  million  shares  of  Series A Stock
converted their shares  into  approximately  6.25 million shares of
Common Stock.  As of March 14, 1995, the remaining 21,000 shares of
Series A Stock are no longer   deemed to be outstanding and holders
of Series A Stock  certificates  were  entitled to receive only the
Redemption Price without additional interest thereon upon surrender
of  the  Series  A  Stock  certificates  properly  endorsed  to the
redemption agent, American Stock Transfer & Trust Company.

Common Stock

The Company is authorized to issue  40.0 million shares of $.01 par
value Common Stock.    Under  the  Reorganization Plan 10.0 million
shares of the Company's Common Stock were issued for the benefit of
holders  of  allowed  claims,  interest  and  equity  claims.    An
additional 6.6 million shares  were  issued  upon the conversion of
Series A Stock in 1994 and  1995, and .4 million shares were issued
in connection with the exercise  of warrants issued pursuant to the
Reorganization Plan.  As  of  December  31, 1997 approximately 17.9
million shares of the Company's Common Stock were outstanding.  The
Certificate of Incorporation of  the Company prohibits the issuance
of certain non-voting equity  securities  as required by the United
States Bankruptcy Code.

Shareholder Rights Plan

On February 24, 1998, the  Board  of  Directors of the Company (the
"Board") adopted a Shareholder Rights Plan (the "Rights Plan")
<PAGE>

designed to assure that in  the  event of an unsolicited or hostile
attempt  to  acquire  the   Company,   the  Board  would  have  the
opportunity to consider  and  implement  a  course  of action which
would best maximize shareholder value.  Under the Rights Plan, each
shareholder will receive a dividend of  one Right for each share of
the Company's outstanding Common  Stock.   Each Right shall entitle
the holder thereof to purchase 1/500th  of a share of the Company's
Series B Preferred Stock (the "Series B Preferred") for $45.00 (the
"Exercise Price").  Each 1/500th Series B Preferred (the "Preferred
Fraction") share shall be entitled to one vote in all matters being
voted on by the holders of  Common Stock and shall also be entitled
to a liquidation preference of $0.20.

The Rights will initially be attached to the Company's Common Stock
and will  not  be  exercisable  until  a  shareholder  or  group of
shareholders acting together,  without  the  approval of the Board,
announce their  intent  to  become  a  15%  or  more  owner  in the
Company's Common Stock.  At  that time, certificates evidencing the
Rights shall  be  distributed  to  shareholders,  the  Rights shall
detach from the Common  Stock  and  shall become exercisable.  When
such buyer acquires 15% or more  of the Company's Common Stock, all
Rights holders, except the non-approved  buyer, will be entitled to
acquire an amount of  the  Preferred  Fraction  at  a rate equal to
twice the Exercise Price divided  by  the  then market price of the
Common Stock.  In addition,  if  the  Company is acquired in a non-
approved merger, after  such  an  acquisition,  all Rights holders,
except the aforementioned 15%  or  more  buyer, will be entitled to
acquire stock in the  surviving  corporation  at  a 50% discount in
accordance with the Rights Plan.

The Rights shall attach to all  common shares held by the Company's
shareholders of record as  of  the  close  of business on March 16,
1998.  Shares of Common Stock that are newly-issued after that date
will also carry Rights  until  the  Rights become detached from the
Common Stock.  The rights  will  expire  on February 23, 2008.  The
Company may redeem the Rights  for  $.01  each at any time before a
non-approved buyer acquires  15%  or  more  of the Company's Common
Stock.  Any current holder  that has previously advised the Company
of owning an amount in excess  of 15% of the Company's Common Stock
as of the  date  hereof  has  been  "grandfathered" with respect to
their  current  position,  including  allowance  for  certain small
incremental additions thereto.

Stock Option Plans

Pursuant to the Reorganization  Plan,  Mr.  Peter J. Ratican, Chief
Executive  Officer  and  President,  and  Mr.  Eugene  L. Froelich,
formerly  Chief Financial  Officer  and  Executive Vice President -
Finance  and  Administration  ("Senior  Management")  each received
stock options, which are all currently exercisable and which expire
on December 5, 2000,  to  purchase  up  to 277,778 shares of Common
Stock at a price of $6.54 per option share.  As of January 1, 1992,
the  Company  entered   into   employment  agreements  with  Senior
Management.  Under the terms of these employment agreements, each
<PAGE>

member of Senior Management  received  a  grant of stock options on
February 25, 1992, to purchase up to 150,000 shares of Common Stock
at a price of  $8.00  per  option  share;  both Mr. Ratican and Mr.
Froelich exercised these options in February 1997.

In December 1990, the Company  approved  the 1990 Stock Option Plan
(the "1990 Plan").  Under the  terms  of the 1990 Plan, as amended,
the Company may issue up  to an aggregate of 1,000,000 nonqualified
stock options to directors, officers  and other employees.  In July
1995, the Company approved  the  1995  Stock Option Plan (the "1995
Plan"). Under the terms of the  1995 Plan, the Company may issue up
to  an  aggregate  of  1,000,000  nonqualified  or  incentive stock
options to directors, officers and other employees.  Under the 1990
Plan and  1995  Plan,  stock  options  granted  to  date  have been
nonqualified stock options which expire no later than 10 years from
the date of grant.   Stock  options  granted to date under the 1990
Plan and 1995 Plan have been at  an exercise price equal to 100% of
the fair market value of the stock at the date of grant.

In July  1996,  the  Company  approved  the  Outside Directors 1996
Formula Stock Option Plan (the "Formula Plan").  Under the terms of
the Formula Plan,  the  Company  may  issue  up  to an aggregate of
125,000  nonqualified  stock  options  to  directors  who  are  not
employees or officers of the Company (the "Outside Directors").  On
the date  the  Formula  Plan  was  adopted,  each  Outside Director
received a grant  of  stock  options  to  purchase  5,000 shares of
Common Stock.  Commencing  January  2,  1997,  and each January 2nd
thereafter, each Outside Director then  serving on the Board  shall
receive a grant of stock options to purchase 5,000 shares of Common
Stock.  Options granted under  the  Formula Plan are at an exercise
price equal to 100% of the  fair  market  value of the stock at the
date of grant, vest six months from the date of grant and expire 10
years from the date of grant.

In July 1996, the Company approved the Senior Executives 1996 Stock
Option Plan (the "Senior Executives Plan").  Under the terms of the
Senior Executives Plan, the Company may issue up to an aggregate of
700,000 nonqualified stock options to  Mr. Ratican and Mr. Froelich
(the "Senior Executives" and  individually the "Senior Executive").
On the date the  Senior  Executives  Plan  was adopted, each Senior
Executive received a  grant  of  stock  options  to purchase 70,000
shares of Common  Stock.    Commencing  January  1,  1997, and each
January 1st thereafter through and  including January 1, 2000, each
Senior Executive then employed by the Company shall receive a grant
of stock options to purchase  70,000  shares  of Common Stock.  Mr.
Froelich's  continuing participation  in the Senior Executives Plan
ceased when  his  employment  with  the  Company  was terminated in
December 1997. Options granted under the Senior Executives Plan are
at an exercise price equal to 100%  of the fair market value of the
stock at the date of  grant,  vest  immediately and expire 10 years
From the date of grant.
<PAGE>


A summary  of  the  Company's  stock  option  activity, and related
information for the years ended December 31 follows:

<TABLE>
<CAPTION>

<S>                              <C>       <C>                <C>       <C>                <C>       <C>
                                           1997                         1996                         1995
                                 --------------------------   --------------------------   --------------------------
                                 Options   Weighted-Average   Options   Weighted-Average   Options   Weighted-Average
                                  (000)     Exercise Price     (000)     Exercise Price     (000)     Exercise Price
                                 -------   ----------------   -------   ----------------   -------   ----------------

Outstanding beginning of year      2,063        $11.92         1,700        $10.56          1,716        $ 8.45
  Granted (a)                        185         22.18           543         16.09            219         25.53
  Exercised                         (403)         8.96          (145)         9.76           (189)         8.58
  Forfeited                          (85)        20.96           (35)        19.45            (46)        11.38
Outstanding end of year            1,760         13.23         2,063         11.91          1,700         10.56
Exercisable end of year            1,478         12.21         1,503          9.47          1,316          7.83


(a) The weighted-average fair value of options granted during  1997, 1996 and 1995 was $10.23,
$7.47 and $11.29, respectively.

</TABLE>


The following  table  summarizes  information  about  stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>


                                  Options Outstanding                        Options Exercisable
                  -------------------------------------------------   -------------------------------

<S>               <C>           <C>                <C>                <C>            <C>
                    Number      Weighted-Average                        Number
                  Outstanding      Remaining                          Exercisable
   Range of       at 12/31/97   Contractual Life   Weighted-Average   at 12/31/97    Weighted-Average
Exercise Prices      (000)       (# of Months)     Exercise Price        (000)        Exercise Price
---------------   -----------   ----------------   ----------------   -----------    ----------------
$ 6.40 - $12.75        814            31               $ 7.11              814           $ 7.11
$13.25 - $19.13        521            83                14.16              366            14.13
$21.25 - $28.38        425           103                23.83              298            23.77
                     -----                                               -----
$ 6.40 - $28.38      1,760            64                13.23            1,478            12.21
                     =====                                               =====
</TABLE>

<PAGE>

The Company has elected to follow  APB Opinion No. 25 and related
Interpretations in  accounting  for  its  employee  stock options
because,  as  discussed   below,   the   alternative  fair  value
accounting provided for under SFAS No. 123 requires use of option
valuation models  that  were  not  developed  for  use in valuing
employee stock options.   Under  APB  Opinion No. 25, because the
exercise price of the Company's employee stock options equals the
market price of the  underlying  stock  on  the date of grant, no
compensation expense is recognized.

Pro forma information regarding net income and earnings per share
is required by SFAS No.  123,  and  has been determined as if the
Company had accounted for  its  employee  stock options under the
fair value method of that  Statement.    The fair value for these
options was estimated at the  date of grant using a Black-Scholes
option  pricing   model   with   the  following  weighted-average
assumptions for  1997,  1996  and  1995, respectively: volatility
factors of the  expected  market  price  of  the Company's common
stock of .43, .43  and  .41;  a weighted-average expected life of
the options of 5.0, 5.0 and 4.8 years; risk-free interest rate of
6.0% and dividend yield of 0%.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are  fully  transferable.    In addition, option
valuation  models  require   the   input   of  highly  subjective
assumptions  including  the   expected  stock  price  volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value  estimate,  in  management's opinion, the existing
models do not necessarily  provide  a  reliable single measure of
the fair value of its employee stock options.

Pro forma  disclosures  required  by  SFAS  No.  123  include the
effects of all stock  option  awards  granted by the Company from
January 1, 1995 through  December  31,  1997.  During the initial
phase-in period,  the  effects  of  applying  this  Statement for
generating  pro  forma   disclosures   are   not   likely  to  be
representative of the effects on  pro forma net income for future
years, for example, because  options  may vest over several years
and additional awards generally are made each year.  For purposes
of pro forma disclosures, the estimated fair value of the options
is amortized to expense  over  the  options' vesting period.  The
Company's pro forma information is as follows for the years ended
December  31  (in  thousands   except   for  earnings  per  share
information):
                                  1997     1996      1995
                                --------  -------   -------
Pro forma net income (loss)     $(38,047) $17,211   $27,623

Pro forma earnings (loss) per
common share:
  Basic                         $  (2.13) $   .98   $  1.71
  Diluted                       $  (2.13) $   .93   $  1.52


<PAGE>

Restricted Stock

On February  27,  1995  the  Board  of  Directors  of the Company
approved Restricted Stock Grant Agreements awarding 65,000 shares
of  Restricted  Stock  each  to  Mr.  Ratican  and  Mr.  Froelich
(individually the "Executive").  Mr.  Froelich's Restricted Stock
vested upon the termination of his employment with the Company on
December 11, 1997.    Mr.  Ratican's  Restricted  Stock vested on
February 27, 1998 upon the  expiration  of the three year vesting
period.

The Company  has  measured  the  total  compensation  cost of the
Restricted Stock awards as the  excess of the quoted market price
of similar but unrestricted  shares  of  stock at the award date,
subject to certain adjustments, over  the purchase price, if any,
of the Restricted Stock.   The  quoted  market price of shares of
the Company's Common Stock at the  date of grant was $16.125, and
the Restricted Stock was  awarded  to  the Executives at no cost.
The  total  compensation  cost  of  the  Restricted  Stock grants
recognized through December 31, 1997 was $1,706,000.

NOTE 6 - NOTES RECEIVABLE FROM SHAREHOLDERS

On February  18,  1997  the  Company  entered  into recourse loan
agreements with Peter J. Ratican and Eugene L. Froelich the Chief
Executive Officer and  Chief  Financial  Officer  of the Company,
respectively (collectively the  "Executives" and individually the
"Executive"),  whereby  the  Company  loaned  to  each  Executive
$2,229,028 in  connection  with  the  exercise  of  certain stock
options granted to  the  Executives  on  February  25, 1992.  The
loans are evidenced by  a  secured Promissory Note which provides
for interest compounding monthly at the one year London Interbank
Offered Rate plus 50 basis points in effect from time to time and
subject to certain adjustments  in  the  event the Company enters
into a transaction to borrow funds.   The interest rate in effect
as of February 18,  1997  was  6.25%.   All principal and accrued
interest is due at the maturity date  of April 1, 2001 or upon an
event of default; provided however,  that if Executive shall sell
any shares of  the  Company's  Common  Stock  serving as security
under the loan  agreement,  the  Executive  shall  pay a pro rata
share of the proceeds to  the  Company  to be applied against any
outstanding principal and accrued  interest  of such Executive as
of such date.   The  principal  and  accrued interest at December
31, 1997  has  been  reflected  as  a  reduction of shareholders'
equity.



<PAGE>

NOTE 7 - INCOME TAXES

The benefit  for  income  taxes  at  December  31  consisted of the
following:


                                  1997      1996      1995
(Amounts in thousands)          -------   -------   -------
Current:
  Federal...................... $  (12)   $   518   $   236
  State........................     73        215       139
                                -------   -------   -------
                                    61        733       375
                                -------   -------   -------
Deferred:
  Federal......................            (3,400)   (3,400)
  State........................    (61)      (600)     (600)
                                -------   -------   -------
                                   (61)    (4,000)   (4,000)
                                -------   -------   -------
Benefit for income taxes....... $  --     $(3,267)  $(3,625)
                                =======   =======   =======


The  federal  and  state  deferred  tax  liabilities  (assets)  are
comprised of the following at December 31:

                                  1997        1996        1995
(Amounts in thousands)         ----------  ----------  ----------
Loss carryforwards...........  $(110,899)  $ (97,444)  $(102,721)
Depreciation.................     (1,540)     (1,371)     (1,316)
Other........................     (3,207)     (3,075)     (2,568)
                               ---------   ---------   ---------

Gross deferred tax assets....   (115,646)   (101,890)   (106,605)
                               ---------   ---------   ---------

Deferred tax assets valuation
  allowance.................      97,585      83,890      92,605
                               ---------   ---------   ---------

Deferred tax asset..........   $ (18,061)  $ (18,000)  $ (14,000)
                               =========   =========   =========
<PAGE>


The differences between the benefit for income taxes at the federal
statutory rate of 34% and that shown in the Consolidated Statements
of  Operations  are  summarized  as  follows  for  the  years ended
December 31:


                                       1997      1996      1995
(Amounts in thousands)               --------  -------   -------
Tax provision (benefit)
  at statutory rate................. $(11,928) $ 5,494   $ 8,177
State income taxes..................       73      215       139
Exercise of nonqualified stock
  options...........................   (1,755)    (809)     (577)
Benefit of NOL carryforwards........            (4,167)   (7,364)
Anticipation of future benefit of
  NOLs..............................      (61)  (4,000)   (4,000)
Limitation on current-year tax
  benefit due to unrealized NOL
  carryforwards.....................   13,671
                                     --------  -------   -------

Benefit for income taxes............ $  --     $(3,267)  $(3,625)
                                     ========  =======   =======


The Company's net operating  loss (NOL) carryforwards increased due
to a $39  million  NOL  for  tax  purposes  incurred  in  1997.  At
December 31, 1997, the  Company  had  NOL carryforwards for federal
tax purposes expiring as follows (amounts are in millions):


          Year of
         Expiration                    NOL

            2003                     $ 174.5
            2004                        94.5
            2005                         1.4
            2006                         2.6
            2007                         1.6
            2112                        39.0
                                     -------
         Total NOL carryforwards     $ 313.6
                                     =======

On December 5, 1990 (the "Effective Date") the Company emerged from
protection under Chapter 11 pursuant to the Company's joint plan of
reorganization, as modified  (the  "Reorganization Plan"). Upon the
Effective Date of the  Reorganization Plan, the Company experienced
a "change of ownership"  pursuant  to  applicable provisions of the
Internal Revenue Code (the "IRC").    As  a result of the ownership
change, the Company's pre-change NOL carryforwards of approximately
$325 million are subject to  limitation under provisions of Section
382 of the IRC.   From the Effective Date through December 31, 1995
the  Company  has  recognized  for  financial  statement  reporting
purposes an annual limitation  for  its  NOLs of approximately $6.3
million per year.  In 1996, the Company
<PAGE>

determined its annual limitation  for  its  pre-change NOLs is $9.2
million per year or an  aggregate  amount  of $139 million over the
carryover period.   The  Company  also  determined during 1996 that
$182 million of additional  limitation  is available for income tax
return purposes under other provisions  of  Section 382 of the IRC.
Accordingly, the Company believes approximately $321 million of the
total  pre-change  NOLs  of  $325  million  will  be  available for
utilization  for  federal  income  tax  return  purposes  over  the
carryover period.  In  the  event  the current limitation amount is
not fully utilized, the Company is allowed to carryover such amount
to subsequent years during the  carryover period.  From December 5,
1990  through  December  31,   1997     the  Company  has  utilized
approximately $55 million of the pre-change NOLs for federal income
tax return purposes and  has  recognized approximately $104 million
of pre-change NOLs for financial statement reporting purposes.  The
Company is unable to quantify  to  what extent, if any, the Company
may be able to fully utilize its remaining pre-change NOLs prior to
their expiration.  Should  the  Company experience a second "change
of ownership", the limitation under Section  382 of the IRC on NOLs
would be recalculated.

SFAS No. 109 "Accounting  for  Income  Taxes" requires that the tax
benefit of such NOLs be  recorded  as  an  asset to the extent that
management assesses the utilization of  such NOLs to be more likely
than not.  Management has  estimated, based on the Company's recent
history of operating results  and  its expectations for the future,
that future taxable income of the Company will more likely than not
be sufficient to utilize a  minimum of approximately $45 million of
NOLs.    Accordingly,  the  Company  has  recognized  an  aggregate
deferred tax asset of $18.1 million as of December 31, 1997 related
to anticipated future utilization of NOLs.

NOTE 8 - EMPLOYEE BENEFIT PLANS

The  Company  adopted  the  Maxicare  Health  Plans,  Inc.  Savings
Incentive Plan (the "Savings Plan")  in  January 1985.  The Savings
Plan is a defined contribution  401(k) profit sharing plan covering
employees  of  the  Company  who  have  satisfied  the  eligibility
requirements.   The  primary  eligibility  requirement  is  that an
employee must have completed one year of eligible service.

The cost of the Savings Plan  is shared by the participants and the
Company.  Eligible  employees  may  defer  from  1%  to 15% of base
compensation on  a  before-tax  basis  in  accordance  with Section
401(k) of the Internal Revenue  Code.    The Savings Plan calls for
the Company to match up to  3% of total compensation, not to exceed
the employee's contribution.    The Company's contributions totaled
$400,000, $350,000 and $302,000  for  the  years ended December 31,
1997, 1996 and 1995, respectively.

Effective January 1, 1997  the  Company adopted the Maxicare Health
Plans, Inc. Supplemental Executive Retirement Plan (the "SERP")
<PAGE>

which covers key executives as selected by the Board.  Benefits are
based on years  of  service  and  average  compensation in the last
three  years  of  employment.  Compensation  expense  recognized in
connection with the SERP was  $984,000  for the year ended December
31,  1997.    Of  this  compensation  expense  recognized  in 1997,
$700,000 related to  the  immediate  recognition  of the discounted
present value  of  vested  retirement  benefits  for  the Company's
former Chief Financial Officer  and  an additional former executive
which was included  in  the  $3.0  million management restructuring
charge recorded  in  the  fourth  quarter  of  1997  (see  Note 9 -
Litigation and Management Restructuring Charges).

NOTE 9 - LITIGATION AND MANAGEMENT RESTRUCTURING CHARGES

On  March  31,  1997  the   Company  received  a  ruling  from  the
Commonwealth of  Pennsylvania  Board  of  Claims  that  Penn Health
Corporation ("Penn Health"), a  subsidiary  of  the Company, is not
entitled to any  recovery  on  its  claim  against the Pennsylvania
Department of Public Welfare ("DPW")  for  in excess of $24 million
plus accrued  interest,  in  connection  with  the  operation  of a
Medicaid managed care program  from 1986 through 1989. Accordingly,
the Company recorded in the  first  quarter of 1997 a $16.0 million
litigation charge to  fully  reserve  for  the recorded estimate of
$15.0 million due the Company  from  the DPW and related litigation
costs.  On April 24,  1997,  the  Company  filed an appeal with the
Commonwealth of Pennsylvania Commonwealth Court seeking to overturn
the Board's order and to award  the Company damages.  DPW has filed
a cross-appeal, appealing the  portion  of the Claims Board's order
imposing liability  upon  the  DPW  for  breach  of  contract.  The
Company believes the resolution of  this matter and the Penn Health
bankruptcy case will  not  adversely  impact  the Company's ongoing
business and operations.

In the fourth quarter of  1997  the Company recorded a $3.0 million
management restructuring charge  for termination expenses primarily
related to the settlement  of  certain  obligations pursuant to the
employment agreement of  Eugene  L.  Froelich, the Company's former
Chief Financial Officer.


<PAGE>

Quarterly Results of Operations (Unaudited)

The  following  is  a  tabulation   of  the  quarterly  results  of
operations for the years ended December 31:
<TABLE>
<CAPTION>

(Amounts in thousands,                                  Three months ended,
except per share data)                     ---------------------------------------------
---------------------                      March 31     June 30     Sept 30     Dec 31
                                           ---------   ---------   ---------   ---------

1997
----
<S>                                        <C>         <C>         <C>         <C>
Revenues                                   $154,496    $163,070    $171,716    $174,541

Income (loss) from operations (1)           (11,711)      2,133     (19,790)    (13,131)

Net income (loss)                            (9,909)      4,229     (17,988)    (11,413)

Net income (loss) per common share:
  Basic                                    $   (.56)   $    .24    $  (1.00)   $   (.64)
  Diluted                                  $   (.56)   $    .23    $  (1.00)   $   (.64)

1996
----

Revenues                                   $131,766     $134,573    $140,794   $155,632

Income (loss) from operations              $  4,184     $   (993)   $  3,453   $  3,083

Net income (2)                             $  5,736     $    523    $  5,025   $  8,141

Net income per common share:
  Basic                                    $    .33     $    .03    $    .29   $    .46
  Diluted                                  $    .31     $    .03    $    .27   $    .44


(1) A $16.0 million litigation charge was recorded in  the first quarter of 1997 as a result of
    a ruling by the Commonwealth of  Pennsylvania  Board of Claims denying the Company recovery
    on its receivable of $15.0  million  due  the  Company  from the Pennsylvania Department of
    Public Welfare, in connection with the  operation  of  a Medicaid managed care program from
    1986 through 1989, and related litigation  costs.    A $20.0 million charge was recorded in
    the third quarter of 1997 to increase  health care claims reserves for unanticipated health
    care costs.  A $3.0  million  management  restructuring  charge  was recorded in the fourth
    quarter of 1997 for termination  expenses  primarily  related  to the settlement of certain
    obligations pursuant to the former chief financial officer's employment agreement.

(2) Includes $3.4 million of income tax benefits from  the recording of a deferred tax asset in
    the fourth quarter of 1996 (see "Item 8. Financial Statements and Supplementary Data - Note
    7 to the Company's Consolidated Financial Statements").
</TABLE>

<PAGE>

Item 9.  Changes in and Disagreements with Accountants on
         ------------------------------------------------
         Accounting and Financial Disclosures
         ------------------------------------

None.


<PAGE>

                             PART III
                             --------


Item 10. Directors, Executive Officers, Promoters and Control
         ----------------------------------------------------
         Persons of the Registrant
         -------------------------

The information set forth in  the  table, the notes thereto and the
paragraphs thereunder, in Part I,  Item  1. of this Form 10-K under
the caption "Directors and Executive Officers of the Registrant" is
incorporated herein by reference.

Compliance with Section 16(A) of the Securities Exchange Act of
---------------------------------------------------------------
1934
----

In December of  1997  Randall  S.  Anderson, Senior Vice President,
Plan Operations Support, was designated an executive officer of the
Company.  Mr. Anderson did not  file  a Form 3 Initial Statement of
Beneficial Ownership of Securities with the Securities and Exchange
Commission until  March  20,  1998.    Mr.  Anderson  engaged in no
transactions involving the Company's  Common Stock between the time
of his designation as an executive officer and his Form 3 filing.

Based upon its review of  such  reports  received by it and written
representations of reporting  persons,  the  Company believes that,
except for the  above  mentioned  item,  its executive officers and
directors filed all required reports on a timely basis.
<PAGE>


Item 11. Executive Compensation
         ----------------------

Shown below  is  information  concerning  the  annual and long-term
compensation for services in all  capacities to the Company for the
years ended December 31, 1997, 1996  and 1995, of those persons who
were, at December 31,  1997  (i)  the chief executive officer, (ii)
the other four most  highly  compensated  executive officers of the
Company or  (iii)  would  have  been  among  the  four  most highly
compensated executive officers of  the  Company  had they held such
title at December 31, 1997 (collectively the "Named Officers"):

<TABLE>
<CAPTION>

                        Summary Compensation Table


                                                                                 Long-Term
                                            Annual Compensation                 Compensation
                                    ----------------------------------     ----------------------
                                                                           Stock       Restricted
                                              Reorganization               Options       Stock
                                                  Plan                     Awards        Awards      All Other
Name and Principal Position  Year    Salary     Bonus(1)      Bonus(2)      (#)           (3)      Compensation(4)
---------------------------  ----   --------  --------------  --------    --------     ----------  ---------------
<S>                          <C>    <C>       <C>            <C>         <C>           <C>         <C>
Peter J. Ratican             1997   $500,000     $71,993                   70,000                    $4,800
Chairman of the Board        1996   $481,250                  $146,872     70,000                    $4,500
of Directors, Chief          1995   $425,000     $25,278      $356,862                 $1,048,125    $4,500
Executive Officer and
President

Eugene L. Froelich (5)       1997   $400,000     $71,993                   70,000                    $4,800
Executive Vice President -   1996   $381,250                  $146,872     70,000                    $4,500
Finance and Administration,  1995   $325,000     $25,278      $356,862                 $1,048,125    $4,500
Chief Financial Officer
and Director

Richard A. Link (6)          1997   $220,000                                                         $4,800
Executive Vice President -   1996   $215,000                               10,000                    $4,500
Finance and Administration,  1995   $205,000                               10,000                    $4,500
Chief Financial Officer

Randall S. Anderson          1997   $190,000                                                         $4,800
Senior Vice President-       1996   $180,000                               10,000                    $4,500
Plan Operations Support      1995   $165,000                               10,000                    $4,500

Alan D. Bloom                1997   $218,000                                                         $4,800
Senior Vice President,       1996   $213,000                                5,000                    $4,500
Secretary and General        1995   $208,000                                                         $4,500
Counsel

Aivars L. Jerumanis          1997   $200,000                                                         $4,800
Senior Vice President -      1996   $195,000                                5,000                    $4,500
Management Information       1995   $190,000                                5,000                    $4,500
Systems and Chief
Information Officer

<PAGE>


(1)  These amounts are bonuses payable pursuant to  the Reorganization Plan and were paid from funds
     held by the Disbursing Agent in a  segregated  account  and  were not paid out of the Company's
     available cash.

(2)  These amounts include $146,872  and  $256,862  paid  in  February  1997 and 1996, respectively,
     pursuant to employment agreements entered into by  the Company with Peter J. Ratican and Eugene
     L. Froelich ("Senior Management").  These employment agreements call for the payment of a bonus
     to Senior Management based  upon  the  Company's  annual  pre-tax earnings before extraordinary
     items.  The 1995 amount also includes  a  $100,000  bonus paid to Senior Management in February
     1995 as determined by the Company's Board of Directors.

(3)  These amounts represent the fair market value  of  65,000 shares of Restricted Stock awarded to
     each of the Named Officers on February  27,  1995,  based  upon the closing market price of the
     Company's Common Stock on that date ($16.125).  Mr. Froelich's Restricted Stock vested upon his
     termination from the Company  on  December  11,  1997.    Based  upon  the closing price of the
     Company's Common Stock on that day ($11.25) the  Restricted Stock awarded to Mr. Froelich had a
     fair market value of $731,250 upon vesting. The  Restricted Stock held by Mr. Ratican vested on
     February 27, 1998.   Based upon the closing price of the Company's Common Stock at December 31,
     1997 ($10.88), the Restricted Stock awarded to Mr.  Ratican had a fair market value of $707,200
     at that date.

(4)  These amounts include contributions made by  the  Company  on behalf of the Named Officer under
     the Company's 401(k) Savings Incentive Plan.

(5)  Mr. Froelich's employment as Executive  Vice  President  - Finance and Administration and Chief
     Financial Officer of the Company was terminated on December 11, 1997.  Mr. Froelich resigned as
     a director of the Company effective January 30,  1998.   On January 30, 1998 the Company made a
     payment of $2,200,000 to Mr.  Froelich  in  settlement  of  certain obligations pursuant to Mr.
     Froelich's Restated Employment Agreement.

(6)  Mr. Link served as  Senior  Vice  President  -  Accounting  and  Chief Accounting Officer until
     December 11, 1997 when he was named  Executive  Vice President - Finance and Administration and
     Chief Financial Officer.
</TABLE>
<PAGE>


Option Grants
-------------

Shown below  is  further  information  on  grants  of stock options
pursuant to  the  Senior  Executives  Plan  during  the  year ended
December 31, 1997, to the Named Officers which are reflected in the
Summary Compensation Table.
<TABLE>
<CAPTION>


                         Number of    Percentage of                                      Potential Realizable
                         Securities   Total Options                                        Value at Assumed
                         Underlying    Granted to     Exercise or                        Annual Rates of Stock
                         Options      Employees in    Base Price        Expiration        Price Appreciation
       Name              Granted (1)  Fiscal 1997     ($/share)(2)         Date           for Option Term (3)
-------------------      -----------  -------------   ------------     -------------     ---------------------
                                                                                            5%          10%
<S>                      <C>          <C>             <C>            <C>                 <C>        <C>
                                                                                         --------   ----------
Peter J. Ratican           70,000        43.75%        $22.25          Jan. 1, 2007      $979,503   $2,482,254
Eugene L. Froelich         70,000        43.75%        $22.25          Jan. 1, 2007      $979,503   $2,482,254


(1)  Options were granted under the Senior Executives Plan  as of January 1, 1997 and vest upon date
     of grant.

(2)  The option exercise price is subject to adjustment  in  the event of a stock split or dividend,
     recapitalization or certain other events.

(3)  The actual value, if any, the Named Officer may  realize will depend on the excess of the stock
     price over the exercise  price  on  the  date  the  option  is  exercised,  so that there is no
     assurance the value realized by the Named Officer will be at or near the value estimated.  This
     amount is net of the option exercise price.

</TABLE>
<PAGE>

Option Exercises and Fiscal Year-End Values
-------------------------------------------

Shown below is information with  respect to the unexercised options
to purchase the Company's Common  Stock  granted in fiscal 1997 and
prior years  under  employment  agreements,  the  1990 Stock Option
Plan, the 1995 Stock Option Plan  and the Senior Executives Plan to
the Named Officers and held by them at December 31, 1997.

<TABLE>
<CAPTION>

                         Number of Unexercised          Value of Unexercised
                           Options Held At             In-the-Money Options At
                          December 31, 1997             December 31, 1997 (1)
                       -------------------------     -------------------------
      Name             Exercisable Unexercisable     Exercisable Unexercisable
-------------------    ----------- -------------     ----------- -------------
<S>                    <C>>        <C>               <C>         <C>
Peter J. Ratican         417,778                     $1,204,168
Eugene L. Froelich       417,778                     $1,204,168
Richard A. Link           69,999      10,001         $  149,975
Randall S. Anderson       29,999      10,001         $    6,225
Alan D. Bloom              4,166       3,334         $
Aivars L. Jerumanis       34,999       5,001         $   63,725


(1) Based on the closing price on the NASDAQ-NMS on that date ($10.88), net of the option exercise price.
</TABLE>


Shown below is information with  respect to stock options exercised
by Named Officers in 1997.

<TABLE>
<CAPTION>

                                                              Number of                  Value of
                           Number of                    Securities Underlying        Unexercised In-the
                            Shares                       Unexercised Options          Money Options at
                          Acquired on     Value          at December 31, 1997        December 31, 1997
       Name                Exercise      Realized      Exercisable/Unexercisable  Exercisable/Unexercisable
-------------------       -----------   ----------     -------------------------  -------------------------
<S>                       <C>           <C>            <C>                        <C>
Peter J. Ratican            150,000     $2,043,750          417,778 /   0           $1,204,168 / $   0
Eugene L. Froelich          150,000     $2,043,750          417,778 /   0           $1,204,168 / $   0
Alan D. Bloom                 5,000     $   70,300            4,166 / 3,334         $     0    / $   0
</TABLE>

Employment Agreements
---------------------

As  of  January  1,  1992,   the  Company  entered  into  five-year
employment agreements with Peter J.  Ratican and Eugene L. Froelich
("Senior Management") which  agreements  were amended by amendments
dated February 27, 1995 (the "Employment Agreements").  As of April
1, 1996, and as amended  on  February 11, 1997, the Company entered
into new five-year employment agreements  with Peter J. Ratican and
Eugene L. Froelich (the  "Restated  Employment Agreements").  These
Restated Employment Agreements provide for annual base compensation
of $500,000 for Mr. Ratican  and $400,000 for Mr. Froelich, subject
to increases and bonuses, as  may  be determined by the Board based
on annual reviews.
<PAGE>


The  Restated   Employment   Agreements   provide   that  upon  the
termination of either member  of  Senior  Management by the Company
(i) for reasons other  than  death,  incapacity, or "Cause" or (ii)
voluntary termination for "Good Reason"  as such term is defined in
the Restated Employment Agreements   or (iii) voluntary termination
by  the  member  of  Senior   Management  except  for  Good  Reason
("Without  Cause"),  the  terminated  member  will  be  entitled to
receive (a)  a  payment  equal  to  the  balance  of the terminated
member's annual base salary  which  would  have  been paid over the
remainder of the term of  the Restated Employment Agreement; (b) an
additional one  year's  annual  base  salary;  (c)  payment  of any
performance bonus amounts which  would  have otherwise been payable
over  the  remainder  of  the   term  of  the  Restated  Employment
Agreement; (d) immediate vesting of  all stock options; and (e) the
continuation of the  right  to  participate  in any profit sharing,
bonus, stock option, pension,  life, health and accident insurance,
or other employee benefit  plans  including a car allowance through
March 31, 2001.  "Cause" is defined as: (i) the willful or habitual
failure  to  perform   requested   duties   commensurate  with  his
employment  without  good  cause;  (ii)  the  willful  engaging  in
misconduct or  inaction  materially  injurious  to  the Company; or
(iii) the conviction for  a  felony  or  of a crime involving moral
turpitude, dishonesty or  theft.    In  the  event  of a "Change of
Control" of the  Company,  either  member  of Senior Management may
elect to terminate  the  Restated  Employment  Agreement within 120
days  after  such  "Change  of  Control"  (the  "Change  of Control
Period") in which  case  the  electing  member  will be entitled to
receive  a  payment  equal  to  2.99  times  that  member's average
annualized compensation from all  sources  from and relating to the
Company,  which  is  includable   in  that  member's  gross  income
(including the  value  of  unexercised  options  and termination of
forfeiture restrictions on shares  of  Common  Stock issued to that
member pursuant to the terms of the Restricted Stock Agreement) for
the most recent five  taxable  years  ending with and including the
calendar year in  which  the  "Change  of Control" occurs, together
with the immediate vesting  of  all  options  to purchase shares of
Common Stock not otherwise already  vested pursuant to the terms of
such options  and  all  shares  of  Restricted  Stock not otherwise
already vested pursuant to  the  terms of the applicable Restricted
Stock Agreement (the  "Change  of  Control  Payment").   "Change of
Control" is defined  as:  (i)  any  transaction  or occurence which
results in the Company ceasing to be publically owned with at least
300 stockholders;  (ii)  any  person  or  group becoming beneficial
owner of  more  than  40%  of  the  combined  voting  power  of the
Company's outstanding securities; (iii) a change in the composition
of the Board, as  set  forth  in the Restated Employment Agreement;
(iv) the merger or consolidation  of  the  Company with or into any
other non-affiliated entity  whereby  the Company's equity security
holders, immediately prior to  such  transaction, own less than 60%
of the equity; or (v) the  sale or transfer of all or substantially
all of the Company's assets.   In the event of death or incapacity,
the member of Senior  Management  or  his estate, shall receive the
equivalent of 90 days base  salary  and  in the case of incapacity,
the continuation of health  and  disability benefits.  The Restated
Employment Agreements also provide that  in the event either member
of Senior Management does not receive an offer for a new employment
agreement containing terms at least as favorable as those contained
<PAGE>

in the existing Restated Employment Agreement before the expiration
of  such  Restated  Employment  Agreements,  such  member  will  be
entitled to receive a payment equal to one year's base salary under
the  terminating  agreement.    Under  these  Restated   Employment
Agreements, each member of  Senior  Management  will be entitled to
receive an annual performance bonus  calculated using a formula, as
set forth in the Restated  Employment Agreements, which is based on
the Company's annual pre-tax  earnings, before extraordinary items,
over $10 million.  In  addition,  upon  the  sale of the Company, a
sale of substantially  all  of  its  assets  or  a merger where the
Company shareholders cease  to  own  a  majority of the outstanding
voting capital stock (a "Sale"), Senior Management will be entitled
to a sale bonus  calculated  using  a  formula  which is based on a
percentage of the excess value of the Company over an initial value
as set  forth  in  the  Restated  Employment  Agreements (the "Sale
Bonus").  Each member of  Senior  Management shall be entitled to a
Sale Bonus  if  a  Sale  occurs  during  the  term  of the Restated
Employment Agreements or thereafter  if a definitive agreement with
respect to a Sale, which is  consummated, is entered into within 90
days after the termination  of  such  member of Senior Management's
Restated Employment Agreement either  by  the Company without Cause
or by such member of Senior Management for Good Reason.

Effective  March  28,  1998,   Mr.  Ratican's  Restated  Employment
Agreement was amended to  provide  that  in the event Mr. Ratican's
employment with the Company  terminates  for  any reason other than
for "Cause"  during  the  Change  of  Control  Period  he  would be
entitled to receive the  Change  of  Control Payment.  In addition,
Mr. Ratican would be entitled to a  Sale Bonus if after a Change of
Control a definitive agreement  with  respect  to  a Sale, which is
consummated, is entered into  (a)  within  one  year if Mr. Ratican
elects to terminate the  Restated  Employment Agreement as a result
of the  Change  of  Control  or  the  Restated Employment Agreement
terminates during the Change of  Control  Period as a result of Mr.
Ratican's death or incapacity or (b) on or before March 31, 2001 if
the Company elects to  terminate  Mr. Ratican's Restated Employment
Agreement Without Cause  or  Mr.  Ratican  terminates such Restated
Employment Agreement for Good Reason.

On December 11, 1997 the employment of Mr. Froelich was terminated.
Effective January 30,  1998  the  Company  and Mr. Froelich entered
into an agreement (the "Release") which settled various obligations
of the Restated Employment  Agreement.  Pursuant to the Release the
Company made  on  January  30,  1998  a  settlement  payment to Mr.
Froelich of $2.2 million  in  satisfaction of various provisions of
the Restated Employment Agreement, including (i) the payment of his
base salary through the remainder of  the term, (ii) the payment of
an additional one year's  annual  base salary, (iii) the settlement
of any performance bonus which  would otherwise be payable over the
remainder of the term, and  (iv) the settlement of the continuation
of the right to  participate  in  any  profit sharing, bonus, stock
option, pension,  life,  health  and  accident  insurance, or other
employee benefit plans including a  car allowance through March 31,
2001.    In  addition,  pursuant  to  the  terms  of  the  Restated
Employment Agreement, Mr. Froelich received the full vesting of all
65,000 shares of Restricted  Stock  effective December 11, 1997 and
in connection  therewith  Mr.  Froelich  delivered  to  the Company
32,728  shares  to  pay  withholding  taxes  whereupon  the Company
delivered the remaining 32,272 shares to Mr. Froelich.  The Company
remains obligated for all benefits due or which may become due Mr.
<PAGE>

Froelich pursuant to the terms  of  the Maxicare Health Plans, Inc.
Supplemental  Executive  Retirement   Plan;  however,  the  parties
clarified these obligations pursuant  to  the  Release.  On January
30, 1998  Mr. Froelich resigned  from the Board of Directors of the
Company.

As of January  1,  1995,  the  Company  entered  into an employment
agreement effective through December 31, 1997 with Richard A. Link.
The contract provided for a minimum base salary of $205,000 subject
to increases and bonuses, as may be determined from time to time by
the Chief Executive Officer of  the  Company.  On December 11, 1997
Mr.  Link  was  named  Executive   Vice  President  -  Finance  and
Administration and Chief Financial Officer  of  the Company.  As of
December 11, 1997, the Company entered into a three-year employment
agreement with Mr. Link which provides for an annual base salary of
$275,000, subject to  increases  and  bonuses  as may be determined
from time to time  by  the  Company's  Chief Executive Officer. The
employment agreement further provides  that upon the termination of
Mr. Link by the Company  without Cause or the voluntary termination
of employment by Mr. Link for  certain  reasons as set forth in the
employment agreement Mr. Link  will  be  entitled  to receive (i) a
payment equal to the balance of  his annual base salary which would
have been paid over  the  remainder  of  the term of the employment
agreement; (ii) an additional one  year's annual base salary; (iii)
immediate vesting of all  stock  options; and (iv) the continuation
of the right to participate  in  any profit sharing, pension ,life,
health and  accident  insurance,  or  other  employee benefit plans
including a car  allowance  through  December  11,  2000.  Cause is
defined as: (i) the  continued  failure or refusal to substantially
perform duties pursuant to  the  terms of the employment agreement;
(ii) the engaging in misconduct or inaction materially injurious to
the Company; or (iii)  the  conviction  of  a  felony or of a crime
involving moral turpitude. In the event of a "Change of Control" of
the  Company,  Mr.  Link  may  elect  to  terminate  the employment
agreement within 120 days  after  such  Change  in Control in which
case he will be entitled to  receive  a payment equal to 2.99 times
his annualized compensation, as defined.   In the event of death or
incapacity, Mr. Link, or  his  estate, shall receive the equivalent
of  90  days  base  salary  and  in  the  case  of  incapacity, the
continuation of health and  life insurance benefits. The employment
agreement also provides that in the event Mr. Link does not receive
an offer for a new  employment  agreement containing terms at least
as  favorable  as  those   contained  in  the  existing  employment
agreement, Mr. Link will be entitled  to receive a payment equal to
one year's base salary under the terminating agreement.

As  of  January  1,  1995,  the  Company  entered  into  employment
agreements, effective through  December  31,  1997, with Randall S.
Anderson,  Alan D. Bloom,  and  Aivars L. Jerumanis.  The contracts
provided for minimum  base  salaries  of  $165,000,  $208,000,  and
$190,000 for Messrs. Anderson,  Bloom, and Jerumanis, respectively,
subject to increases and bonuses, as may be determined from time to
time by the Chief Executive Officer  of the Company.  As of January
1, 1998, the Company  entered  into  new employment agreements with
Mr. Anderson and Mr. Bloom effective through December 31, 1999 and
<PAGE>

December 31,  1998,  respectively.    Pursuant  to these respective
agreements, in the event that  either  Mr. Anderson or Mr. Bloom is
terminated without cause as set forth in the agreements, he will be
entitled to receive (a) the greater  of his base salary through the
expiration date of the agreement or  six months base salary and (b)
health, dental,  disability  and  life  insurance  benefits  he was
receiving prior to such termination.

Supplemental Executive Retirement Plan
--------------------------------------

Effective January 1, 1997  the  Company adopted the Maxicare Health
Plans, Inc. Supplemental Executive  Retirement Plan (the "SERP), an
unfunded retirement plan which covers key executives of the Company
as designated by the Board  of Directors (the "Participants").  All
of the Named Officers  of  the Company are designated Participants.
The SERP provides for  a  retirement  benefit  equal  to 25% of the
Participant's   average   compensation    (the   average   of   the
Participant's base salary  and  annual  bonus  for  the final three
years of service) to be reduced  by 1/15th for each year of service
by which the Participant's years of service are less than 15 years.
The retirement benefit  fully  vests  upon the Participant reaching
the age of 55 or  upon  a  "Change of Control" if the Participant's
employment with the Company  is  terminated  within two years after
the "Change of Control".  On March 28, 1998 the SERP was amended to
provide for full  vesting  to  Participants  who elect to terminate
their employment with the Company pursuant to a "Change of Control"
clause in  their  employment  agreement.      The normal retirement
benefit is payable at age 65; however, the Participant may elect to
receive an early retirement benefit whereupon, such benefit will be
reduced  by  1/240th  for  each  month  by  which  the distribution
precedes  the  normal  retirement  date.    In  addition,  the SERP
provides for a pre-retirement  death  benefit  equal to 200% of the
Participant's average compensation.

Compensation of Directors
-------------------------

During 1997,  non-employee  directors  of the Company (the "Outside
Directors") received compensation for  their services as directors.
These members were  Claude  S.    Brinegar, Florence F. Courtright,
Thomas W. Field, Jr., Charles  E.  Lewis  and Alan S. Manne. During
1997,   Messrs.  Brinegar  and  Field  each  earned  $44,000,   Ms.
Courtright and Mr. Manne each  earned  $41,000 and Mr. Lewis earned
$42,500.  During  1998,  the  Outside  Directors  will receive cash
compensation for their services in  the amount of $30,000 per year,
plus $750 per meeting.   In  addition, directors are entitled to be
reimbursed for all  reasonable  out-of-pocket  expenses incurred in
connection with their services as directors of the Company.

The Outside Directors have  received  options to purchase shares of
Common Stock at an exercise price equal to the market price at the
<PAGE>

date of grant.  Set  forth  below  is a schedule of the outstanding
options at December 31,  1997  held  by  the Outside Directors, the
date of grant and the exercise price of such options:


                         # of                       Exercise Price
      Director          Options    Date of Grant      Per Share
---------------------   -------  -----------------  --------------
Claude S. Brinegar       10,000  December 20, 1993     $ 9.63
                          5,000  July 26, 1996         $14.75
                          5,000  January 2, 1997       $22.25

Florence F. Courtright   10,000  November 5, 1993      $10.88
                          5,000  July 26, 1996         $14.75
                          5,000  January 2, 1997       $22.25

Thomas W. Field          10,000  December 20, 1993     $ 9.63
                          5,000  July 26, 1996         $14.75
                          5,000  January 2, 1997       $22.25

Charles E. Lewis          5,000  July 26, 1996         $14.75
                          5,000  January 2, 1997       $22.25

Alan S. Manne             5,000  January 28, 1994      $12.63
                          5,000  July 26, 1996         $14.75
                          5,000  January 2, 1997       $22.25

For those outstanding options  granted  prior  to July 26, 1996 the
options vested at the date of  grant and expire five years from the
date  of  grant  provided  these  directors  continue  to  serve as
directors of the Company.   If the directorship is terminated, such
options expire 30 days from the date of such termination.

The options granted July 26,  1996 and thereafter were issued under
the Formula Plan.  Commencing January 2, 1997, and each January 2nd
thereafter, each Outside  Director  then  serving  on  the Board of
Directors shall receive a grant  of stock options to purchase 5,000
shares of Common Stock.  The  options vest six months from the date
of grant and   expire ten years from the date of grant provided the
director continues to serve as a  director  of the Company.  In the
event of termination of  the  directorship, such options expire one
year from the date of such termination.

On February 26, 1997 Mr.  Field exercised 10,000 options granted to
him on April 1, 1992 at an  exercise price of $10.50.  On April 30,
1997 Mr. Manne exercised  5,000  options  granted to him on January
28, 1994 at an exercise price of $12.63.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

Peter J.  Ratican,  the  Company's  President  and  Chief Executive
Officer, served as an ex-officio member of the Compensation
<PAGE>

Committee of the  Company  for  the  year  ended December 31, 1997.
Although  Mr.  Ratican  served  as  an  ex-officio  member  of this
Compensation Committee, he  did  not  participate  in any decisions
regarding his  own  compensation  as  an  executive  officer.   The
Company's Board of Directors  as  a  whole determines Mr. Ratican's
total compensation package.

<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and
          ---------------------------------------------------
          Management
          ----------


The following table sets  forth  the  number  and percentage of the
outstanding  shares  of  Common  Stock  owned  beneficially  as  of
December  31,  1997  by  each  director,  by  the  Company's  Chief
Executive  Officer  ("CEO"),   by   the   four  other  most  highly
compensated executive officers other than the CEO, by all directors
and executive officers as a group,  and  by each person who, to the
knowledge of the Company,  beneficially  owned  more than 5% of any
class of the Company's voting stock on such date.


                                           Amount and Nature of
                                         Beneficial Ownership(1)
                                         -----------------------
                                                      Percentage
                                          Common      of Common
Name and Address of Person or Group       Stock(2)     Stock(3)
-----------------------------------      ---------    ----------

Heartland Advisors, Inc. (4)             3,312,000       18.5%
  790 North Milwaukee Street
  Milwaukee, Wisconsin  53202

Morgan Stanley, Dean Witter,  (5)        2,040,010       11.4%
Discover & Co.
  1585 Broadway
  New York, New York  10036

Miller Anderson & Sherrerd LLP (5)       1,957,500       10.9%
  1 Tower Bridge, Suite 1100
  West Conshohocken, Pennsylvania 19428

Snyder Capital Management, L.P. (6)      1,804,100       10.1%
  Snyder Capital Management, Inc.
  and Alan Barry Snyder
  350 California Street, Suite 1460
  San Francisco, Ca  94104

Franklin Resources, Inc.,                1,789,197       10.0%
Charles B. Johnson and
Rupert H. Johnson, Jr.  (7)
  777 Mariners Island Boulevard
  San Mateo, California  94404 and
Franklin Mutual Advisers, Inc.  (7)
  51 John F. Kennedy Parkway
  Short Hills, New Jersey  07078

<PAGE>


                                           Amount and Nature of
                                         Beneficial Ownership(1)
                                         -----------------------
                                                      Percentage
                                          Common      of Common
Name and Address of Person or Group       Stock(2)     Stock(3)
-----------------------------------      ---------    ----------
Jenswold, King and Associates, Inc. (8)    992,270       5.5%
  Two Post Oak Central
  1980 Post Oak Boulevard
  Suite 2400
  Houston, Texas  77056

Peter J. Ratican (9)                       633,026       3.4%
  1149 South Broadway Street
  Los Angeles, California  90015

Eugene L. Froelich (9)                     600,050       3.3%
  1149 South Broadway Street
  Los Angeles, California  90015

Richard A. Link (10)                        70,025        *
  1149 South Broadway Street
  Los Angeles, California  90015

Aivars L. Jerumanis (11)                    40,999        *
  1149 South Broadway Street
  Los Angeles, California  90015

Randall D. Anderson (12)                    30,024        *
  1149 South Broadway Street
  Los Angeles, Ca  90015

Thomas W. Field, Jr. (13)                   30,000        *
  1149 South Broadway Street
  Los Angeles, California  90015

Claude S. Brinegar (13)                     24,000        *
  1149 South Broadway Street
  Los Angeles, California  90015

Florence F. Courtright (14)                 20,000        *
  1149 South Broadway Street
  Los Angeles, California  90015

Alan S. Manne (14)                          15,000        *
  1149 South Broadway Street
  Los Angeles, California  90015

Charles E. Lewis (15)                       10,018        *
  1149 South Broadway Street
  Los Angeles, California  90015

<PAGE>

Alan D. Bloom (16)                           4,577        *
  1149 South Broadway Street
  Los Angeles, California  90015

All Directors and Executive Officers
  as a Group (14 persons) (17)           1,643,109       8.6%


-------------------------
* - less than one percent

(1)  Except  as  otherwise   set   forth  herein,  all  information
     pertaining to the  holdings  of  persons  who beneficially own
     more than 5% of any class of the Company's voting stock (other
     than the Company or  its  executive officers and directors) is
     based on filings with  the  Securities and Exchange Commission
     (the "SEC") and information provided by the record holders.

(2)  In setting forth "beneficial" ownership,  the rules of the SEC
     require that shares  underlying currently exercisable options,
     including options  which  become  exercisable  within 60 days,
     held by a described person  be treated as "beneficially" owned
     and further require that  every  person  who has or shares the
     power to vote or to dispose  of shares of stock be reported as
     a "beneficial" owner of all  shares  as to which any such sole
     or shared power exists.    As  a consequence, shares which are
     not yet outstanding  are,  if  obtainable  upon exercise of an
     option which is exercisable  or will become exercisable within
     60 days, nevertheless treated  as  "beneficially" owned by the
     designated person, and several persons may be deemed to be the
     "beneficial" owners of the  same  securities if they share the
     power to vote or dispose of them.

(3)  Assumes 17,935,631 shares  of  Common  Stock outstanding, and,
     with respect to each listed  beneficial owner, the exercise or
     conversion of any  option  or  right  held  by each such owner
     exercisable or convertible within 60 days.

(4)  Heartland Advisors, Inc.  is  an investment adviser registered
     under Section 203 of the Investment Advisors Act of 1940.  All
     shares are held  in  various  investment  advisory accounts of
     Heartland Advisors, Inc.    These  beneficial owners have sole
     voting  power  with  respect  to  3,142,500  shares  and  sole
     dispositive power with respect to 3,312,000 shares.  The above
     information presented in  regards  to the beneficial ownership
     of the Company's Common  Stock  by Heartland Advisors, Inc. is
     based upon a Schedule  13G  filed  by Heartland Advisors, Inc.
     with the SEC on February 3, 1998.

(5)  Morgan Stanley, Dean Witter, Discover & Co. ("Morgan Stanley")
     is an investment adviser  registered  under Section 203 of the
     Investment Advisors Act of  1940.    Morgan Stanley has shared
     voting power with  respect  to  1,797,532  of these shares and
     shared dispositive power with respect to 2,040,010 of these
<PAGE>

     shares.  The  above  information  presented  in regards to the
     beneficial ownership of  the  Company's  Common Stock is based
     upon  a  Schedule  13G  filed  by  Morgan  Stanley  and Miller
     Anderson & Sherrerd LLP with the SEC on February 13, 1998.

     Miller  Anderson  &  Sherrerd  LLP  is  an  investment adviser
     registered under Section 203 of the Investment Advisors Act of
     1940.   Miller  Anderson  &  Sherrerd  LLP  is  a wholly-owned
     subsidiary  of  the  Morgan  Stanley  and  Miller  Anderson  &
     Sherrerd LLP has shared voting power with respect to 1,729,400
     of these shares and  shared  dispositive power with respect to
     1,957,500 of these  shares  (all  shares  of Miller Anderson &
     Sherrerd LLP are  also  included  in  the beneficial ownership
     disclosures attributed  to  Morgan  Stanley  in  the preceding
     paragraph).  The above information presented in regards to the
     beneficial ownership of  the  Company's  Common Stock is based
     upon  a  Schedule  13G  filed  by  Morgan  Stanley  and Miller
     Anderson & Sherrerd LLP with the SEC on February 13, 1998.

(6)  Snyder  Capital  Management,  L.P.  is  an  investment adviser
     registered under Section 203 of the Investment Advisers Act of
     1940.  Snyder Capital Management,  Inc. is the general partner
     of Snyder Capital Management, L.P.    Alan Barry Snyder is the
     controlling shareholder  of  Snyder  Capital  Management, Inc.
     These filers have sole voting  power with respect to 80,100 of
     these shares, shared voting power with respect to 1,618,600 of
     these shares, sole dispositive power with respect to 80,100 of
     these shares  and  shared  dispositive  power  with respect to
     1,724,000 of these shares.  The above information presented in
     regards to the  beneficial  ownership  of the Company's Common
     Stock by these filers is  based  upon  a Schedule 13G filed by
     these filers with the SEC on February 19, 1998.

(7)  These shares are beneficially  owned  by  one  or more open or
     closed-end  investment  companies  or  other  managed accounts
     which are advised by  direct  and indirect investment advisory
     subsidiaries   (the   "Adviser   Subsidiaries")   of  Franklin
     Resources, Inc. ("FRI").    Such  advisory  contracts grant to
     such Adviser Subsidiaries all voting and investment power over
     the securities owned  by  such  advisory  clients.  Therefore,
     such Adviser Subsidiaries may be deemed to be, for purposes of
     Rule 13d-3 under  the  Securities  Exchange  Act  of 1934, the
     beneficial owner of these shares.

     Charles B. Johnson and Rupert  H. Johnson, Jr. (the "Principal
     Shareholders") each own in  excess  of  10% of the outstanding
     Common Stock of FRI and are the principal shareholders of FRI.
     FRI and the Principal  Shareholders  may  be deemed to be, for
     purposes of Rule  13d-3  under  the  1934  Act, the beneficial
     owner of securities held  by  persons  and entities advised by
     FRI or its subsidiaries.   FRI, the Principal Shareholders and
     each  of  the  Adviser   Subsidiaries  disclaim  any  economic
     interest or beneficial ownership in any of these shares.

     These  beneficial  owners  have  sole  voting  power  and sole
     dispositive power with respect to 1,789,197 shares.  The above

     information presented in  regards  to the beneficial ownership
     of  the  Company's   Common   Stock   by  FRI,  the  Principal
     Shareholders and  the  Adviser  Subsidiaries  is  based upon a
     Schedule  13G  filed  with  the  SEC  by  FRI,  the  Principal
     Shareholders and the Adviser Subsidiaries on February 5, 1998.

(8)  Jenswold,  King  and  Associates,  Inc.,  ("Jenswold")  is  an
     investment  advisor  registered  under   Section  203  of  the
     Investment Advisors Act  of  1940.    Jenswold has sole voting
     power  with  respect  to  848,662  of  these  shares  and sole
     dispositive power with  respect  to  992,270  of these shares.
     The  above  information  presented  in  regards  to Jenswold's
     beneficial ownership of  the  Company's  Common Stock is based
     upon a schedule 13G filed by  Jenswold with the SEC on January
     12, 1998.

(9)  Includes 417,778 shares which are subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(10) Includes 69,999 shares which are  subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(11) Includes 34,999 shares which are  subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(12) Includes 29,999 shares which are  subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(13) Includes 20,000 shares which are  subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(14) All  shares  are  subject   to  options  which  are  currently
     exercisable or will become exercisable within 60 days.

(15) Includes 10,000 shares which are  subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(16) Includes 4,166 shares which  are  subject to options which are
     currently exercisable  or  will  become  exercisable within 60
     days.

(17) Includes 1,224,683 shares which  are  subject to options which
     are currently exercisable or will become exercisable within 60
     days.


<PAGE>

Item 13. Certain Relationships and Related Transactions
         ----------------------------------------------

On  February  18,  1997  the  Company  entered  into  recourse loan
agreements with  Peter  J.  Ratican  and  Eugene  L.  Froelich (the
"Executives" and individually the  "Executive") whereby the Company
loaned to each Executive $2,229,028 in connection with the exercise
of certain stock options granted  to the Executives on February 25,
1992 (see "Item. 8.  Financial  Statements and Supplementary Data -
Note 6 to  the  Company's  Consolidated Financial Statements"). The
loans are evidenced by a secured Promissory Note which provides for
interest compounding  monthly  at  the  one  year  London Interbank
Offered Rate plus 50 basis points  in  effect from time to time and
subject to certain adjustments in the event the Company enters into
a transaction to borrow funds.   The  interest rate in effect as of
February 18, 1997 was 6.25%.  All principal and accrued interest is
due at the maturity  date  of  April  1,  2001  or upon an event of
default; provided however, that  if  Executive  sells any shares of
the Company's  Common  Stock  serving  as  security  under the loan
agreement, then  Executive  shall  pay  a  pro  rata  share  of the
proceeds to  the  Company  to  be  applied  against any outstanding
principal and accrued interest  owed  by  such Executive as of such
date.


<PAGE>

                              PART IV
                              -------


Item 14. Exhibits, Financial Statement Schedules, and Reports on
         -------------------------------------------------------
         Form 8-K
         --------

(a) 1. Financial Statements
         The  following   consolidated   financial   statements  of
         Maxicare Health Plans, Inc. are included in this report in
         response to Item 8.

         Report of Independent Auditors - Ernst & Young LLP

         Consolidated Balance Sheets - At December 31, 1997
           and 1996
         Consolidated Statements of Operations - Years ended
           December 31, 1997, 1996 and 1995
         Consolidated Statements of Cash Flows - Years ended
           December 31, 1997, 1996 and 1995
         Consolidated Statements of Changes in Shareholders'
           Equity - Years ended December 31, 1997, 1996 and 1995
         Notes to Consolidated Financial Statements

(a) 2. Financial Statement Schedules

         Schedule I - Condensed Financial Information of Registrant
         - Condensed Balance Sheets at  December 31, 1997 and 1996,
         Condensed   Statements   of   Operations   and   Condensed
         Statements of Cash Flows for  the years ended December 31,
         1997,  1996  and   1995,   Notes  to  Condensed  Financial
         Information of Registrant

         Schedule II -  Valuation  and  Qualifying Accounts for the
         years ended December 31, 1997, 1996 and 1995

All other financial statement schedules have been omitted since the
required information  is  not  present  or  not  present in amounts
sufficient to require submission  of  the  schedule, or because the
required information  is  included  in  the  consolidated financial
statements or notes thereto.

(b) 1. Reports on Form 8-K

         December 11, 1997 - Item 5.  Other Events:

         The Company reported the termination of Eugene L. Froelich
         as Executive Vice  President  - Finance and Administration
         and Chief Financial Officer and the appointment of Richard
         A. Link to those positions.
<PAGE>


(c) 1. Exhibits

 2.1   Joint Plan of Reorganization dated May 14, 1990, as modified
       on May 24, 1990 and July 12, 1990 (without schedules)*

 2.2   Order Confirming Joint Plan  of Reorganization dated May 14,
       1990, as  Modified,  entered  on  August  31,  1990 (without
       exhibits or schedules)*

 2.3   Amendment to Order  Confirming  Joint Plan of Reorganization
       dated May 14, 1990, as Modified, entered on August 31, 1990*

 2.4   Stipulation and Order Re  Conditions to Effectiveness of the
       Plan, entered on December 3, 1990*

 2.5   Notice That The Conditions to Effectiveness of the Plan Have
       Been Met or Waived, filed on December 4, 1990*

 2.6   Agreement and Plan of Merger  of Maxicare Health Plans, Inc.
       and HealthCare  USA  Inc.,  dated  as  of  December  5, 1990
       (without exhibits or schedules)*

 3.1   Charter  of  Maxicare   Health   Plans,   Inc.,  a  Delaware
       corporation*

 3.3   Amendment to  Charter  of  Maxicare  Health  Plans,  Inc., a
       Delaware corporation@

 3.4   Amended Bylaws of  Maxicare  Health  Plans, Inc., a Delaware
       corporation@@@

 3.4a  Amendment No. 1 to  Amended  and Restated Bylaws of Maxicare
       Health Plans, Inc.
 3.5   Certificate of Incorporation, as amended and restated, which
       includes,   Restated   Certificate   of   Incorporation   of
       Healthcare USA Inc. filed  with  the Office of the Secretary
       of State of Delaware on July 19, 1985, Certificate of Merger
       of MHP Acquisition Corp. into Healthcare USA Inc. filed with
       the  Office  of  the  Secretary  of  State  of  Delaware  on
       September 13,  1986,  Certificate  of  Change  of Registered
       Agent and Registered  Office  filed  with  the Office of the
       Secretary  of  State  of   Delaware   on  August  17,  1987,
       Certificate of Merger  Merging  Maxicare  Health Plans, Inc.
       with and into Healthcare  USA  Inc.  (including as Exhibit A
       thereto  the  Restated   Certificate   of  Incorporation  of
       Healthcare USA Inc.) filed with  the Office of the Secretary
       of State of  Delaware  on  December  5, 1990, Certificate of
       Correction filed with the  Office  of the Secretary of State
       of Delaware on May  17,  1991,  Certificate of Ownership and
       Merger  Merging  HealthAmerica   Corporation  into  Maxicare
       Health Plans, Inc. filed with the Office of the Secretary of
       State of  Delaware  on  November  22,  1991,  Certificate of
       Amendment  of  Restated   Certificate  of  Incorporation  of
       Maxicare Health Plans,  Inc.  filed  with  the Office of the
       Secretary of State of Delaware on March 9, 1992, Certificate
<PAGE>

of Ownership and Merger  Merging  HCS  Computer, Inc. into Maxicare
Health Plans, Inc. filed with the  Office of the Secretary of State
of Delaware on November 6,  1992, and Certificate of Designation of
Series B Preferred Stock of  Maxicare Health Plans, Inc. filed with
the Office of the Secretary  of  State  of Delaware on February 27,
1998^^^

 4.1   Form of Certificate of  New  Common Stock of Maxicare Health
       Plans, Inc.*

 4.2   Form of Certificate  of  Warrant  of  Maxicare Health Plans,
       Inc.*

 4.4   Warrant Agreement by and between Maxicare Health Plans, Inc.
       and American Stock  Transfer  &  Trust  Company, dated as of
       December 5, 1990*

 4.5   Stock  Transfer  Agent  Agreement  by  and  between Maxicare
       Health Plans,  Inc.,  and  American  Stock  Transfer & Trust
       Company, dated as of December 5, 1990*

 4.6   Registration Undertaking  by  Maxicare  Health  Plans, Inc.,
       dated as of December 5, 1990*

 4.8   Portions of Charter of Maxicare Health Plans, Inc., relating
       to the  rights  of  holders  of  the  New  Common Stock, the
       Warrants, or the New Senior Notes*

 4.9   Portions of Bylaws of  Maxicare Health Plans, Inc., relating
       to the  rights  of  holders  of  the  New  Common Stock, the
       Warrants, or the New Senior Notes*

 4.10  Series A  Cumulative  Convertible  Preferred  Stock Purchase
       Agreement dated as of December 17, 1991**

 4.11  Series A  Cumulative  Convertible  Preferred  Stock Purchase
       Agreement dated as of January 31, 1992**

 4.12  Form of Certificate  of  Preferred  Stock of Maxicare Health
       Plans, Inc.@

 4.13  Rights Agreement, dated as  of    February 24, 1998, between
       Maxicare Health Plans,  Inc.  and  American Stock Transfer &
       Trust Company, as Rights Agent, which includes, as Exhibit A
       thereto,  the  Certificate   of   Designation  of  Series  B
       Preferred Stock of Maxicare Health Plans, Inc., as Exhibit B
       thereto, the Form of  Right Certificate, Form of Assignment,
       and Form of Election to  Purchase, and as Exhibit C thereto,
       the Summary of Rights Agreement. ^^^

10.1   Management Incentive Program*

10.2   Incentive Compensation Agreement*
<PAGE>


10.3b  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc.  and  Peter J. Ratican, dated as
       of January 1, 1992@

10.3c  Amendment  No.  1  to  the  Employment  and  Indemnification
       Agreement by and  between  Maxicare  Health  Plans, Inc. and
       Peter J. Ratican, dated as of January 1, 1992@@@@

10.3d  Amended   and   Restated   Employment   and  Indemnification
       Agreement by and  between  Maxicare  Health  Plans, Inc. and
       Peter J. Ratican, dated as of April 1, 1996###

10.3e  Loan Agreement by  and  between  Maxicare Health Plans, Inc.
       and  Peter  J.  Ratican  entered  into  as  of  February 18,
       1997@@@@@@

10.3f  Secured Promissory Note executed  by  Peter J. Ratican as of
       February 18, 1997@@@@@@

10.3g  Pledge Agreement by and  between Maxicare Health Plans, Inc.
       and  Peter  J.  Ratican  entered  into  as  of  February 18,
       1997@@@@@@

10.3h  Amendment No. 1 to  the  Amended and Restated Employment and
       Indemnification Agreement  by  and  between  Maxicare Health
       Plans, Inc. and Peter J. Ratican@@@@@@

10.4b  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans,  Inc.  and  Eugene L. Froelich, dated
       January 1, 1992@

10.4c  Amendment  No.  1  to  the  Employment  and  Indemnification
       Agreement by and  between  Maxicare  Health  Plans, Inc. and
       Eugene L. Froelich, dated January 1, 1992@@@@

10.4d  Amended   and   Restated   Employment   and  Indemnification
       Agreement by and  between  Maxicare  Health  Plans, Inc. and
       Eugene L. Froelich, dated as of April 1, 1996###

10.4e  Loan Agreement by  and  between  Maxicare Health Plans, Inc.
       and Eugene  L.  Froelich  entered  into  as  of February 18,
       1997@@@@@@

10.4f  Secured Promissory Note executed by Eugene L. Froelich as of
       February 18, 1997@@@@@

10.4g  Pledge Agreement by and  between Maxicare Health Plans, Inc.
       and Eugene  L.  Froelich  entered  into  as  of February 18,
       1997@@@@@@

10.4h  Amendment No. 1 to  the  Amended and Restated Employment and
       Indemnification Agreement  by  and  between  Maxicare Health
       Plans, Inc. and Eugene L. Froelich@@@@@@
<PAGE>

10.7e  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc. and  Vicki F. Perry, dated as of
       January 1, 1995@@@@

10.8d  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc. and  Alan  D. Bloom, dated as of
       January 1, 1995@@@@

10.8e  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plan, Inc.  and  Alan  D. Bloom, dated as of
       January 1, 1998

10.9d  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc. and Richard A. Link, dated as of
       January 1, 1995@@@@

10.9e  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc. and Richard A. Link, dated as of
       December 11, 1997

10.12e Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc.  and  Aivars L. Jerumanis, dated
       as of January 1, 1995@@@@

10.14  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Peter J. Ratican, dated as of December 5, 1990*

10.14a Amendment No. 1 to the Stock Option Agreement by and between
       Maxicare Health Plans, Inc.  and  Peter J. Ratican, dated as
       of December 5, 1990###

10.15  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Eugene L. Froelich, dated as of December 5, 1990*

10.15a Amendment No. 1 to the Stock Option Agreement by and between
       Maxicare Health Plans, Inc. and Eugene L. Froelich, dated as
       of December 5, 1990###

10.18  Form of  Stock  Option  Agreement  by  and  between Maxicare
       Health Plans, Inc. and Vicki  F. Perry, dated as of December
       5, 1990*

10.20  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Richard A. Link, dated as of December 5, 1990*

10.23  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Aivars L. Jerumanis, dated as of December 5, 1990*

10.28  Form of Distribution Trust Agreement*

10.30  Maxicare Health Plans, Inc. 401(k) Plan*

10.36  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Claude S. Brinegar, dated as of July 18, 1991@
<PAGE>


10.42  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Peter J. Ratican, dated as of February 25, 1992@

10.42a Amendment No. 1 to the Stock Option Agreement by and between
       Maxicare Health Plans, Inc.  and  Peter J. Ratican, dated as
       of February 25, 1992###

10.42b Amendment No. 2 to the Stock Option Agreement by and between
       Maxicare Health Plans, Inc.  and  Peter J. Ratican, dated as
       of February 25, 1992@@@@@@

10.43  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Eugene L. Froelich, dated as of February 25, 1992@

10.43a Amendment No. 1 to the Stock Option Agreement by and between
       Maxicare Health Plans, Inc. and Eugene L. Froelich, dated as
       of February 25, 1992###

10.43b Amendment No. 2 to the Stock Option Agreement by and between
       Maxicare Health Plans, Inc. and Eugene L. Froelich, dated as
       of February 25, 1992@@@@@@

10.44  Amended Maxicare Health Plans, Inc. 1990 Stock Option Plan@

10.50  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Thomas W. Field, Jr., dated as of April 1, 1992@@

10.51d Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc.  and  Robert J. Landis, dated as
       of January 1, 1995@@@@

10.51e Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc.  and  Robert J. Landis, dated as
       of January 1, 1998

10.52  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Robert J. Landis, dated as of December 5, 1990@@

10.54  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Florence  F.  Courtright,  dated  as of November 5,
       1993@@@

10.55  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Vicki F. Perry, dated as of December 20, 1993@@@

10.56  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Alan D. Bloom, dated as of December 20, 1993@@@

10.57  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Richard A. Link, dated as of December 20, 1993@@@

10.58  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and  Aivars  L.  Jerumanis,  dated  as  of December 20,
       1993@@@
<PAGE>


10.59  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Robert J. Landis, dated as of December 20, 1993@@@

10.61  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Thomas  W.  Field,  Jr.,  dated  as of December 20,
       1993@@@

10.63  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and  Claude  S.  Brinegar,  dated  as  of  December 20,
       1993@@@

10.68  Lease  by  and  between  Maxicare  Health  Plans,  Inc.  and
       Transamerica Occidental Life Insurance  Company, dated as of
       June 1, 1994#

10.69  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Alan S. Manne, dated as of January 28, 1994@@@@

10.70  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Alan D. Bloom, dated as of December 8, 1994@@@@

10.71  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and  Aivars  L.  Jerumanis,  dated  as  of  December 8,
       1994@@@@

10.72  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Richard A. Link, dated as of December 8, 1994@@@@

10.74  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Robert J. Landis, dated as of December 8, 1994@@@@

10.75  Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Vicki F. Perry, dated as of December 8, 1994@@@@

10.76  Restricted Stock  Grant  Agreement  by  and between Maxicare
       Health  Plans,  Inc.  and  Peter  J.  Ratican,  dated  as of
       February 27, 1995@@@@

10.77  Restricted Stock  Grant  Agreement  by  and between Maxicare
       Health Plans,  Inc.  and  Eugene  L.  Froelich,  dated as of
       February 27, 1995@@@@

10.78  Maxicare Health Plans, Inc. 1995 Stock Option Plan##

10.78a Amendment Number One to the Maxicare Health Plans, Inc. 1995
       Stock Option Plan@@@@@@

10.79  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc. and  Warren D. Foon, dated as of
       January 1, 1995@@@@@

10.79a Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc. and  Warren D. Foon, dated as of
       January 1, 1998
<PAGE>


10.80a Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Warren D. Foon, dated as of May 20, 1991@@@@@

10.80c Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Warren D. Foon, dated as of December 20, 1993@@@@@

10.80d Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Warren D. Foon, dated as of December 8, 1994@@@@@

10.81  Form  of  Stock   Option   Agreement   relating  to  Exhibit
       10.78@@@@@

10.82a Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Peter J. Ratican, dated as of April 1, 1996###

10.82b Stock Option Agreement by and between Maxicare Health Plans,
       Inc. and Eugene L. Froelich, dated as of April 1, 1996###

10.83  Maxicare Health Plans,  Inc.  Outside Directors 1996 Formula
       Stock Option Plan####

10.83a Amendment Number  One  to  the  Maxicare  Health Plans, Inc.
       Outside Directors 1996 Formula Stock Option Plan@@@@@@

10.84  Maxicare Health  Plans,  Inc.  Senior  Executives 1996 Stock
       Option Plan####

10.84a Amendment Number  One  to  the  Maxicare  Health Plans, Inc.
       Senior Executives 1996 Stock Option Plan@@@@@@

10.85  Letter of Intent for  the  Transfer  of Medi-Cal Members and
       Provision of Services^

10.85a Health Services  Agreement  between  Maxicare,  a California
       Health Plan and Molina Medical Centers^^

10.86  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans Inc. and Sanford N. Lewis, dated as of
       January 1, 1998

10.87  Maxicare   Health   Plans,   Inc.   Supplemental   Executive
       Retirement Program

10.88  Employment  and  Indemnification  Agreement  by  and between
       Maxicare Health Plans, Inc.  and  Randall S. Anderson, dated
       January 1, 1998

21     List of Subsidiaries@@@

23.1   Consent of Independent Auditors - Ernst & Young LLP

27     Financial Data Schedule for the year ended December 31, 1997

28.1   Notice That The Conditions to Effectiveness of the Plan Have
       Been Met or Waived***
<PAGE>


28.2   Stipulation    and    Order    Regarding    Conditions    to
       Effectiveness of Joint Plan of Reorganization***

99.8   Press  Release  dated  March  20,  1998  announcing  consent
       solicitation by a 1.3% shareholder
-------------------

*        Incorporated by reference  from the Company's Registration
         Statement on Form 10,  declared  effective March 18, 1991,
         in which this exhibit bore the same exhibit number.

**       Incorporated by reference  from  the  Company's Reports on
         Form 8-K dated December 17,  1991 and January 31, 1992, in
         which this exhibit bore the same exhibit number.

***      Incorporated by  reference  from  the  Company's Report on
         Form 8-K dated  December  5,  1990,  in which this exhibit
         bore the same exhibit number.

@        Incorporated by reference from the Company's Annual Report
         on Form 10-K  for  the  year  ended  December 31, 1991, in
         which this exhibit bore the same exhibit number.

@@       Incorporated by reference from the Company's Annual Report
         on Form 10-K  for  the  year  ended  December 31, 1992, in
         which this exhibit bore the same exhibit number.

@@@      Incorporated by reference from the Company's Annual Report
         on Form 10-K  for  the  year  ended  December 31, 1993, in
         which this exhibit bore the same exhibit number.

@@@@     Incorporated by reference from the Company's Annual Report
         on Form 10-K  for  the  year  ended  December 31, 1994, in
         which this exhibit bore the same exhibit number.

@@@@@    Incorporated by reference from the Company's Annual Report
         on Form 10-K  for  the  year  ended  December 31, 1995, in
         which this exhibit bore the same exhibit number.

@@@@@@   Incorporated by reference from the Company's Annual Report
         on Form 10-K  for  the  year  ended  December 31, 1996, in
         which this exhibit bore the same exhibit number.

#        Incorporated by  reference  from  the  Company's Quarterly
         Report  on  Form  10-Q  for  the  quarterly  period  ended
         September 30, 1994, in  which  this  exhibit bore the same
         exhibit number.

##       Incorporated by  reference  from  the  Company's Quarterly
         Report  on  Form  10-Q  for  the  quarterly  period  ended
         September 30, 1995, in  which  this  exhibit bore the same
         exhibit number.

###      Incorporated by  reference  from  the  Company's Quarterly
         Report on Form 10-Q  for  the  quarterly period ended June
         30, 1996, in  which  this  exhibit  bore  the same exhibit
         number.
<PAGE>


####     Incorporated  by  reference   from   the  Company's  Proxy
         Statement for Annual Meeting  of Stockholders held on July
         26, 1996.

^        Incorporated by  reference  from  the  Company's Report on
         Form 8-K dated May 27, 1997 in which this exhibit bore the
         same exhibit number.

^^       Incorporated by  reference  from  the  Company's Report on
         Form 8-K dated July  18,  1997  in which this exhibit bore
         the same exhibit number.

^^^      Incorporated by  reference  from  the  Company's Report on
         Form 8-K dated  February  24,  1998  in which this exhibit
         bore the same exhibit number.



                             SIGNATURES



         Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the  Registrant  has duly caused this report to
be  signed  on  its   behalf   by  the  undersigned,  thereunto  duly
authorized.


    March 30, 1998                    /s/ PETER J. RATICAN
    --------------                    ------------------------
         Date                             Peter J. Ratican
                                       Chief Executive Officer


    March 30, 1998                    /s/ RICHARD A. LINK
    --------------                    ------------------------
         Date                             Richard A. Link
                                       Chief Financial Officer



<PAGE>

         Pursuant to the requirements  of the Securities Exchange Act
of 1934, this report has  been  signed below by the following persons
on behalf of the Registrant  and  in  the capacities and on the dates
indicated.


   Signatures                      Title                 Date
   ----------                      -----                 ----


/s/ Peter J. Ratican         Chairman and Director   March 30, 1998
--------------------------
    Peter J. Ratican


/s/ Claude S. Brinegar       Director                March 30, 1998
--------------------------
    Claude S. Brinegar


/s/ Florence F. Courtright   Director                March 30, 1998
--------------------------
    Florence F. Courtright


/s/ Thomas W. Field, Jr      Director                March 30, 1998
--------------------------
    Thomas W. Field, Jr.


/s/ Charles E. Lewis         Director                March 30, 1998
--------------------------
    Charles E. Lewis


/s/ Alan S. Manne            Director                March 30, 1998
--------------------------
    Alan S. Manne



<PAGE>

                  MAXICARE HEALTH PLANS, INC.

  SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                   CONDENSED BALANCE SHEETS

                    (Amounts in thousands)

<TABLE>
<CAPTION>


                                                                        December 31,
                                                                       1997      1996
                                                                     --------  --------
<S>                                                                  <C>       <C>
CURRENT ASSETS
  Cash and cash equivalents......................................... $  1,750  $ 12,554
  Marketable securities.............................................   11,690    24,297
  Amounts due from affiliates - Note 2..............................    2,121     4,036
  Deferred tax asset................................................   18,061    18,000
  Other current assets.............................................     2,526     2,328
                                                                     --------  --------
     TOTAL CURRENT ASSETS...........................................   36,148    61,215

PROPERTY AND EQUIPMENT, NET.........................................      900     1,148
INVESTMENT IN SUBSIDIARIES..........................................   51,751    60,473
OTHER LONG-TERM ASSETS..............................................      229       267
                                                                     --------  --------
     TOTAL ASSETS................................................... $ 89,028  $123,103
                                                                     ========  ========

CURRENT LIABILITIES
  Amounts due to affiliates - Note 2................................ $    332  $     47
  Payable to disbursing agent.......................................              1,000
  Other current liabilities.........................................    7,638     5,446
                                                                     --------  --------
     TOTAL CURRENT LIABILITIES......................................    7,970     6,493

OTHER LONG-TERM LIABILITIES.........................................       22       364
                                                                     --------  --------
     TOTAL LIABILITIES..............................................    7,992     6,857
                                                                     --------  --------

COMMITMENTS AND CONTINGENCIES - Note 3

TOTAL SHAREHOLDERS' EQUITY..........................................   81,036   116,246
                                                                     --------  --------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................... $ 89,028  $123,103
                                                                     ========  ========








                See notes to condensed financial information of registrant.
</TABLE>

<PAGE>

                  MAXICARE HEALTH PLANS, INC.

  SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                CONDENSED STATEMENTS OF OPERATIONS

                    (Amounts in thousands)

<TABLE>
<CAPTION>


                                                                Years ended December 31,
                                                               1997       1996       1995
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>
REVENUES
  Equity in earnings (losses) of subsidiaries............... $(35,021)  $  1,287   $ 18,318
  Service agreement income..................................   10,865     11,572     11,115
  Other income..............................................    1,988      6,728
                                                             --------   --------   --------
     TOTAL REVENUES.........................................  (22,168)    19,587     29,433
                                                             --------   --------   --------
EXPENSES
  Marketing, general and administrative expenses............   15,082     11,667     14,123
  Depreciation and amortization.............................      566      1,077      1,011
                                                             --------   --------   --------
     TOTAL EXPENSES.........................................   15,648     12,744     15,134
                                                             --------   --------   --------
INCOME (LOSS) FROM OPERATIONS...............................  (37,816)     6,843     14,299

  Investment income.........................................    2,352      1,709      1,191
  Interest expense, net of inter-company interest income
    and expense.............................................      (44)       (71)       (34)
                                                             --------   --------   --------
INCOME (LOSS) BEFORE INCOME TAXES...........................  (35,508)     8,481     15,456

INCOME TAX BENEFIT..........................................      427     10,944     12,220
                                                             --------   --------   --------
NET INCOME (LOSS)........................................... $(35,081)  $ 19,425   $ 27,676
                                                             ========   ========   ========







                 See notes to condensed financial information of registrant.
</TABLE>

<PAGE>

                  MAXICARE HEALTH PLANS, INC.

  SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                CONDENSED STATEMENTS OF CASH FLOWS

                    (Amounts in thousands)

<TABLE>
<CAPTION>


                                                            Years ended December 31,
                                                           1997       1996       1995
                                                         --------   --------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                      <C>        <C>        <C>
Net income (loss)....................................... $(35,081)  $ 19,425   $ 27,676
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
  Depreciation and amortization.........................      565      1,077      1,011
  Benefit from deferred income taxes....................      (61)    (4,000)    (4,000)
  Management restructuring charge.......................    3,000
  Amortization of restricted stock......................      426        699        583
  Provision for long-term receivables valuation.........                          2,004
  Equity in earnings of subsidiaries....................   35,021     (1,287)   (18,318)
  Changes in other miscellaneous assets and
     liabilities........................................      805     (4,297)    (3,372)
                                                         --------   --------   --------
Net cash provided by operating activities...............    4,675     11,617      5,584
                                                         --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sales and maturities (purchases)
     of marketable securities, net......................   12,607     (9,289)    (4,254)
  Capital contributions to subsidiaries, net............  (28,600)   (11,300)    (5,530)
  Dividends received from subsidiaries..................    2,300     11,250      8,130
  Purchases of property and equipment, net..............     (222)       (24)       (50)
  Loans to shareholders.................................   (4,458)
                                                         --------   --------   --------
Net cash used for investing activities..................  (18,373)    (9,363)    (1,704)
                                                         --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on capital lease obligations.................     (350)      (476)      (145)
  Stock options exercised...............................    3,613      1,417      1,621
  Redemption of preferred stock.........................                           (525)
  Repurchase of restricted stock........................     (369)
                                                         --------   --------   --------
Net cash provided by financing activities...............    2,894       941         951
                                                         --------   --------   --------
Net increase (decrease) in cash and cash equivalents....  (10,804)     3,195      4,831
Cash and cash equivalents at beginning of year..........   12,554      9,359      4,528
                                                         --------   --------   --------
Cash and cash equivalents at end of year................ $  1,750   $ 12,554   $  9,359
                                                         ========   ========   ========
Supplemental disclosures of cash flow information:
  Cash paid during the year for -
    Interest............................................ $     48   $     93   $     22
    Income taxes........................................ $    100   $    347   $  2,689



<PAGE>

                  MAXICARE HEALTH PLANS, INC.

  SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                CONDENSED STATEMENTS OF CASH FLOWS

                    (Amounts in thousands)




                                                            Years ended December 31,
                                                          1997        1996      1995
                                                         -------    -------    -------
Supplemental schedule of non-cash investing activities:
  Capital lease obligations incurred for purchase of
    property and equipment and intangible assets........ $   102               $  963

Supplemental schedule of non-cash financing activities:
  Reclassification of preferred stock capital accounts
    to common stock capital accounts pursuant to the
    conversion of preferred stock to common stock.......                       $53,195
  Issuance of restricted common stock...................                       $ 2,096






                 See notes to condensed financial information of registrant.

</TABLE>


<PAGE>

                    MAXICARE HEALTH PLANS, INC.

    SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

      NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT



NOTE 1 - GENERAL

The  condensed  financial  information  of  the  registrant ("MHP")
should be  read  in  conjunction  with  the  consolidated financial
statements and the notes to consolidated financial statements which
are included elsewhere herein.

NOTE 2 - TRANSACTIONS WITH AFFILIATES

MHP operates under a  decentralized  and segregated cash management
system.  The operating  subsidiaries  currently pay monthly fees to
MHP pursuant to administrative services agreements.

NOTE 3 - COMMITMENTS AND CONTINGENCIES

MHP's assets held under  capital  leases  at  December 31, 1997 and
1996 of $805,000 and  $786,000,  respectively, (net of $744,000 and
$660,000, respectively, of  accumulated amortization) are comprised
primarily of equipment  leases.    Amortization expense for capital
leases is included in depreciation expense.

Future  minimum  lease  commitments  for  noncancelable  leases  at
December 31, 1997 were as follows:


                                    Operating   Capitalized
                                     Leases       Leases
     (Amounts in thousands)         ---------   -----------
     1998.......................... $ 1,451     $   321
     1999..........................   1,027          23
     2000..........................     149
     2001..........................     148
     2002 and thereafter...........
                                     ------        ----
     Total minimum
       obligations.................  $2,775         344
                                     ======

     Less current
       obligations.................                 321
     Long-term                                     ----
       obligations.................                $ 23
                                                   ====



<PAGE>

                   MAXICARE HEALTH PLANS, INC.

          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                      (Amounts in thousands)

               For the Year Ended December 31, 1997

<TABLE>
<CAPTION>


<S>                       <C>             <C>         <C>              <C>            <C>
Column A                   Column B               Column C              Column D        Column E
--------                  ----------      --------------------------   ----------     -------------
                                                  Additions
                                          --------------------------
                          Balance at      Charged to    Charged to
                          beginning       costs and   other accounts   Deductions      Balance at
Description               of period        expenses    - describe      - describe     end of period
-----------               ----------      ----------  --------------   ----------     -------------
Allowance for
  doubtful accounts
  and retroactive
  billing adjustments     $ 5,112                     $   295 (1)                     $ 5,407

Other valuation
  accounts                    330                                      $   330 (2)
                          -------                     -------          -------        -------
                          $ 5,442                     $   295          $   330        $ 5,407
                          =======                     =======          =======        =======


(1)  Increase in allowance, net of retroactive billing adjustment write-offs.
(2)  Reduction to valuation allowance for long-term receivables.

                                 For the Year Ended December 31, 1996


Column A                   Column B               Column C              Column D        Column E
--------                  ----------      --------------------------   ----------     -------------
                                                  Additions
                                          --------------------------
                          Balance at      Charged to    Charged to
                          beginning       costs and   other accounts   Deductions      Balance at
Description               of period        expenses    - describe      - describe     end of period
-----------               ----------      ----------  --------------   ----------     -------------
Allowance for
  doubtful accounts
  and retroactive
  billing adjustments     $ 2,941                     $ 2,171(1)                      $ 5,112

Other valuation
  accounts                  2,004                                      $ 1,674 (2)        330
                          -------                     -------          -------        -------
                          $ 4,945                     $ 2,171          $ 1,674        $ 5,442
                          =======                     =======          =======        =======


(1)  Increase in allowance, net of retroactive billing adjustment write-offs.
(2)  Reduction to valuation allowance for long-term receivables.




<PAGE>

                                     MAXICARE HEALTH PLANS, INC.

                            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                        (Amounts in thousands)

                                 For the Year Ended December 31, 1995



Column A                   Column B               Column C              Column D        Column E
--------                  ----------      --------------------------   ----------     -------------
                                                  Additions
                                          --------------------------
                          Balance at      Charged to    Charged to
                          beginning       costs and   other accounts   Deductions      Balance at
Description               of period        expenses    - describe      - describe     end of period
-----------               ----------      ----------  --------------   ----------     -------------
Allowance for
  doubtful accounts
  and retroactive
  billing adjustment      $  3,371                                     $    430(1)    $  2,941

Other valuation
  accounts                      32        $  2,004(2)                        32(3)       2,004
                          --------        --------                     --------       --------
                          $  3,403        $  2,004                     $    462       $  4,945
                          ========        ========                     ========       ========


(1)  Decrease in allowance, net of retroactive billing adjustment write-offs.
(2)  Increase to valuation allowance for long-term receivables.
(3)  Reduction in notes receivable reserve.



</TABLE>
<PAGE>

                         INDEX TO EXHIBITS



Exhibit                                               Sequential
Number    Description                                 Page Number
------    -----------------------------------------   -----------
2.1       Joint Plan of Reorganization dated May 14,
          1990, as modified on May 24, 1990 and
          July 12, 1990 (without schedules)*

2.2       Order Confirming Joint Plan of
          Reorganization dated May 14, 1990, as
          Modified, entered on August 31, 1990
          (without exhibits or schedules)*

2.3       Amendment to Order Confirming Joint Plan
          of Reorganization dated May 14, 1990, as
          Modified, entered on August 31, 1990*

2.4       Stipulation and Order Re Conditions to
          Effectiveness of the Plan, entered on
          December 3, 1990*

2.5       Notice That The Conditions to Effectiveness
          of the Plan Have Been Met or Waived, filed
          on December 4, 1990*

2.6       Agreement and Plan of Merger of Maxicare
          Health Plans, Inc. and HealthCare USA Inc.,
          dated as of December 5, 1990 (without
          exhibits or schedules)*

3.1       Charter of Maxicare Health Plans, Inc.,
          a Delaware corporation*

3.3       Amendment to Charter of Maxicare Health
          Plans, Inc., a Delaware corporation@

3.4       Amended Bylaws of Maxicare Health
          Plans, Inc., a Delaware corporation@@@

3.4a      Amendment No. 1 to Amended and Restated
          Bylaws of Maxicare Health Plans, Inc.        112 of 193

3.5       Certificate of Incorporation, as amended
          and restated, which includes, Restated
          Certificate of Incorporation of Healthcare
          USA Inc. filed with the Office of the
          Secretary of State of Delaware on July 19,
          1985, Certificate of Merger of MHP
          Acquisition Corp. into Healthcare USA Inc.
          filed with the Office of the Secretary of
          State of Delaware on September 13, 1986,
          Certificate of Change of Registered Agent
          and Registered Office filed with the Office
          of the Secretary of State of Delaware on
<PAGE>

Exhibit                                               Sequential
Number    Description                                 Page Number
------    -----------------------------------------   -----------

          August 17, 1987, Certificate of Merger
          Merging Maxicare Health Plans, Inc. with
          and into Healthcare USA Inc. (including as
          Exhibit A thereto the Restated Certificate
          of Incorporation of Healthcare USA
          Inc.) filed with the Office of the
          Secretary of State of Delaware on December
          5, 1990, Certificate of Correction filed
          with the Office of the Secretary of State
          of Delaware on May 17, 1991, Certificate
          of Ownership and Merger Merging
          HealthAmerica Corporation into Maxicare
          Health Plans, Inc. filed with the Office
          of the Secretary of State of Delaware on
          November 22, 1991, Certificate of
          Amendment of Restated Certificate of
          Incorporation of Maxicare Health Plans,
          Inc. filed with the Office of the
          Secretary of State of Delaware on
          March 9, 1992, Certificate of Ownership
          and Merger Merging HCS Computer, Inc.
          into Maxicare Health Plans, Inc. filed
          with the Office of the Secretary of State
          of Delaware on November 6, 1992, and
          Certificate of Designation of Series B
          Preferred Stock of Maxicare Health Plans,
          Inc. filed with the Office of the
          Secretary of State of Delaware on
          February 27, 1998^^^

4.1       Form of Certificate of New Common Stock of
          Maxicare Health Plans, Inc.*

4.2       Form of Certificate of Warrant of Maxicare
          Health Plans, Inc.*

4.4       Warrant Agreement by and between Maxicare
          Health Plans, Inc. and American Stock
          Transfer & Trust Company, dated as of
          December 5, 1990*

4.5       Stock Transfer Agent Agreement by and
          between Maxicare Health Plans, Inc.,
          and American Stock Transfer & Trust
          Company, dated as of December 5, 1990*

4.6       Registration Undertaking by Maxicare Health
          Plans, Inc., dated as of December 5, 1990*
<PAGE>

Exhibit                                               Sequential
Number    Description                                 Page Number
------    -----------------------------------------   -----------

4.8       Portions of Charter of Maxicare Health
          Plans, Inc., relating to the rights of
          holders of the New Common Stock, the
          Warrants, or the New Senior Notes*

4.9       Portions of Bylaws of Maxicare Health Plans,
          Inc., relating to the rights of holders of
          the New Common Stock, the Warrants, or the
          New Senior Notes*

4.10      Series A Cumulative Convertible Preferred
          Stock Purchase Agreement dated as of
          December 17, 1991**

4.11      Series A Cumulative Convertible Preferred
          Stock Purchase Agreement dated as of
          January 31, 1992**

4.12      Form of Certificate of Preferred Stock of
          Maxicare Health Plans, Inc.@

4.13      Rights Agreement, dated as of  February 24,
          1998, between Maxicare Health Plans, Inc.
          and American Stock Transfer & Trust
          Company, as Rights Agent, which includes,
          as Exhibit A thereto, the Certificate of
          Designation of Series B Preferred Stock of
          Maxicare Health Plans, Inc., as Exhibit B
          thereto, the Form of Right Certificate,
          Form of Assignment, and Form of Election
          to Purchase, and as Exhibit C thereto,
          the Summary of Rights Agreement. ^^^

10.1      Management Incentive Program*

10.2      Incentive Compensation Agreement*

10.3b     Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Peter J. Ratican, dated as of January
          1, 1992@

10.3c     Amendment No. 1 to the Employment and
          Indemnification Agreement by and between
          Maxicare Health Plans, Inc. and Peter J.
          Ratican, dated as of January 1, 1992@@@@

10.3d     Amended and Restated Employment and
          Indemnification Agreement by and between
          Maxicare Health Plans, Inc. and Peter J.
          Ratican, dated as of April 1, 1996###
<PAGE>

Exhibit                                               Sequential
Number    Description                                 Page Number
------    ------------------------------------------  -----------

10.3e     Loan Agreement by and between Maxicare
          Health Plans, Inc. and Peter J. Ratican
          entered into as of February 18, 1997@@@@@@

10.3f     Secured Promissory Note executed by Peter
          J. Ratican as of February 18, 1997@@@@@@

10.3g     Pledge Agreement by and between Maxicare
          Health Plans, Inc. and Peter J. Ratican
          entered into as of February 18, 1997@@@@@@

10.3h     Amendment No. 1 to the Amended and
          Restated Employment and Indemnification
          Agreement by and between Maxicare Health
          Plans, Inc. and Peter J. Ratican@@@@@@

10.4b     Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Eugene L. Froelich, dated January 1,
          1992@

10.4c     Amendment No. 1 to the Employment and
          Indemnification Agreement by and between
          Maxicare Health Plans, Inc. and Eugene L.
          Froelich dated, January 1, 1992@@@@

10.4d     Amended and Restated Employment and
          Indemnification Agreement by and between
          Maxicare Health Plans, Inc. and Eugene L.
          Froelich, dated as of April 1, 1996###

10.4e     Loan Agreement by and between Maxicare
          Health Plans, Inc. and Eugene L. Froelich
          entered into as of February 18, 1997@@@@@@

10.4f     Secured Promissory Note executed by Eugene
          L. Froelich as of February 18, 1997@@@@@@

10.4g     Pledge Agreement by and between Maxicare
          Health Plans, Inc. and Eugene L. Froelich
          entered into as of February 18, 1997@@@@@@

10.4h     Amendment No. 1 to the Amended and
          Restated Employment and Indemnification
          Agreement by and between Maxicare Health
          Plans, Inc. and Eugene L. Froelich@@@@@@

10.7e     Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Vicki F. Perry, dated as of January
          1, 1995@@@@
<PAGE>

Exhibit                                               Sequential
Number    Description                                 Page Number
------    ------------------------------------------  -----------

10.8d     Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Alan D. Bloom, dated as of January 1,
          1995@@@@

10.8e     Employment and Indemnification Agreement
          by and between Maxicare Health Plan, Inc.
          and Alan D. Bloom, dated as of January 1,
          1998                                         113 of 193

10.9d     Employment and Indemnification Agreement
          by and between Maxicare Health Plans,
          Inc. and Richard A. Link, dated as of
          January 1, 1995@@@@

10.9e     Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Richard A. Link, dated as of December 11,
          1997                                         122 of  193

10.12e    Employment and Indemnification Agreement by
          and between Maxicare Health Plans, Inc. and
          Aivars Jerumanis, dated as of January 1,
          1995@@@@

10.14     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Peter J.
          Ratican, dated as of December 5, 1990*

10.14a    Amendment No. 1 to the Stock Option
          Agreement by and between Maxicare Health
          Plans, Inc. and Peter J. Ratican, dated
          as of December 5, 1990###

10.15     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Eugene L.
          Froelich, dated as of December 5, 1990*

10.15a    Amendment No. 1 to the Stock Option
          Agreement by and between Maxicare Health
          Plans, Inc. and Eugene L. Froelich, dated
          as of December 5, 1990###

10.18     Form of Stock Option Agreement by and
          between Maxicare Health Plans, Inc. and
          Vicki F. Perry, dated as of December 5,
          1990*

10.20     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Richard
          A. Link, dated as of December 5, 1990*
<PAGE>

Exhibit                                               Sequential
Number    Description                                 Page Number
------    ------------------------------------------  -----------

10.23     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Aivars L.
          Jerumanis, dated as of December 5, 1990*

10.28     Form of Distribution Trust Agreement*

10.30     Maxicare Health Plans, Inc. 401(k) Plan*

10.36     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Claude
          S. Brinegar, dated as of July 18, 1991@

10.42     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Peter J.
          Ratican, dated as of February 25, 1992@

10.42a    Amendment No. 1 to the Stock Option
          Agreement by and between Maxicare Health
          Plans, Inc. and Peter J. Ratican, dated
          as of February 25, 1992###

10.42b    Amendment No. 2 to the Stock Option
          Agreement by and between Maxicare Health
          Plans, Inc. and Peter J. Ratican, dated
          as of February 25, 1992@@@@@@

10.43     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Eugene
          L. Froelich, dated as of February 25,
          1992@

10.43a    Amendment No. 1 to the Stock Option
          Agreement by and between Maxicare Health
          Plans, Inc. and Eugene L. Froelich, dated
          as of February 25, 1992###

10.43b    Amendment No. 2 to the Stock Option
          Agreement by and between Maxicare Health
          Plans, Inc. and Eugene L. Froelich, dated
          as of February 25, 1992@@@@@@

10.44     Amended Maxicare Health Plans, Inc.
          1990 Stock Option Plan@

10.50     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Thomas W.
          Field, Jr., dated as of April 1, 1992@@

10.51d    Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Robert J. Landis, dated as of January 1,
          1995@@@@
<PAGE>


Number    Description                                 Page Number
------    ------------------------------------------  -----------

10.51e    Employment and Indemnification Agreement
          by and between Maxicare Health Plans, Inc.
          and Robert J. Landis, dated as of January 1,
          1998                                         138 of 193

10.52     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Robert J.
          Landis, dated as of December 5, 1990@@

10.54     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Florence F.
          Courtright, dated as of November 5, 1993@@@

10.55     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Vicki
          F. Perry, dated as of December 20, 1993@@@

10.56     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Alan D.
          Bloom, dated as of December 20, 1993@@@

10.57     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Richard A.
          Link, dated as of December 20, 1993@@@

10.58     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Aivars L.
          Jerumanis, dated as of December 20, 1993@@@

10.59     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Robert J.
          Landis, dated as of December 20, 1993@@@

10.61     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Thomas
          W. Field, Jr., dated as of December 20,
          1993@@@

10.63     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Claude
          S. Brinegar, dated as of December 20,
          1993@@@

10.68     Lease by and between Maxicare Health Plans,
          Inc. and Transamerica Occidental Life
          Insurance Company, dated as of June 1, 1994#

10.69     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Alan S.
          Manne dated as of January 28, 1994@@@@
<PAGE>

Exhibit                                               Sequential
Number    Description                                 Page Number
-------   ----------------------------------------    -----------

10.70     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Alan D.
          Bloom, dated as of December 8, 1994@@@@

10.71     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Aivars L.
          Jerumanis, dated as of December 8,
          1994@@@@

10.72     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Richard A.
          Link, dated as of December 8, 1994@@@@

10.74     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Robert J.
          Landis, dated as of December 8,
          1994@@@@

10.75     Stock Option Agreement by and between
          Maxicare Health Plans, Inc. and Vicki F.
          Perry, dated as of December 8,
          1994@@@@

10.76    Restricted Stock Grant Agreement by and
         between Maxicare Health Plans, Inc. and
         Peter J. Ratican, dated as of February
         27, 1995@@@@

10.77    Restricted Stock Grant Agreement by and
         between Maxicare Health Plans, Inc. and
         Eugene L. Froelich, dated as of February
         27, 1995@@@@

10.78    Maxicare Health Plans, Inc., 1995 Stock
         Option Plans##

10.78a   Amendment Number One to the Maxicare
         Health Plans, Inc. 1995 Stock Option
         Plan@@@@@@

10.79    Employment and Indemnification Agreement
         by and between Maxicare Health Plans, Inc.
         and Warren D. Foon, dated as of January 1,
         1995@@@@@

10.79a   Employment and Indemnification Agreement
         by and between Maxicare Health Plans, Inc.
         and Warren D. Foon, dated as of January 1,
         1998                                          147 of 193
<PAGE>

Exhibit                                               Sequential
Number   Description                                  Page Number
-------  -------------------------------------------  -----------

10.80a   Stock Option Agreement by and between
         Maxicare Health Plans, Inc. and Warren D.
         Foon, dated as of May 20, 1991@@@@@

10.80c   Stock Option Agreement by and between
         Maxicare Health Plans, Inc. and Warren D.
         Foon, dated as of December 20, 1993@@@@@

10.80d   Stock Option Agreement by and between
         Maxicare Health Plans, Inc. and Warren D.
         Foon, dated as of December 8, 1994@@@@@

10.81    Form of Stock Option Agreement relating
         to Exhibit 10.78@@@@@

10.82a   Stock Option Agreement by and between
         Maxicare Health Plans, Inc. and Peter J.
         Ratican, dated as of April 1, 1996###

10.82b   Stock Option Agreement by and between
         Maxicare Health Plans, Inc. and Eugene L.
         Froelich, dated as of April 1, 1996###

10.83    Maxicare Health Plans, Inc. Outside
         Directors 1996 Formula Stock Option
         Plan####

10.83a   Amendment Number One to the Maxicare
         Health Plans, Inc. Outside Directors
         1996 Formula Stock Option Plan@@@@@@

10.84    Maxicare Health Plans, Inc. Senior
         Executives 1996 Stock Option Plan####

10.84a   Amendment Number One to the Maxicare
         Health Plans, Inc. Senior Executives
         1996 Stock Option Plan@@@@@@

10.85    Letter of Intent for the Transfer of
         Medi-Cal Members and Provision of Services^

10.85a   Health Services Agreement between Maxicare,
         a California Health Plan and Molina Medical
         Centers^^

10.86    Employment and Indemnification Agreement by
         and between Maxicare Health Plans Inc. and
         Sanford N. Lewis, dated as of January 1,
         1998                                          156 of 193
<PAGE>

Exhibit                                               Sequential
Number   Description                                  Page Number
-------  -------------------------------------------  -----------

10.87    Maxicare Health Plans, Inc. Supplemental
         Executive Retirement Program                  165 of 193

10.88    Employment and Indemnification Agreement by   182 of 193
         and between Maxicare Health Plans, Inc. and
         Randall S. Anderson, dated January 1, 1998

21       List of Subsidiaries@@@

23.1     Consent of Independent Auditors
         - Ernst & Young LLP                           191 of 193

27       Financial Data Schedule for the year
         ended December 31, 1997                       192 of 193

28.1     Notice That The Conditions to
         Effectiveness of the Plan Have Been
         Met or Waived***

28.2     Stipulation and Order Regarding Conditions
         to Effectiveness of Joint Plan of
         Reorganization***


-------------------
*      Incorporated by  reference  from  the Company's Registration
       Statement on Form 10, declared  effective March 18, 1991, in
       which this exhibit bore the same exhibit number.

**     Incorporated by reference from the Company's Reports on Form
       8-K dated December 17, 1991  and  January 31, 1992, in which
       this exhibit bore the same exhibit number.

***    Incorporated by reference from  the Company's Report on Form
       8-K dated December 5, 1990,  in  which this exhibit bore the
       same exhibit number.

@      Incorporated by reference  from  the Company's Annual Report
       on Form 10-K for the year  ended December 31, 1991, in which
       this exhibit bore the same exhibit number.

@@     Incorporated by reference  from  the Company's Annual Report
       on Form 10-K for the year  ended December 31, 1992, in which
       this exhibit bore the same exhibit number.

@@@    Incorporated by reference  from  the Company's Annual Report
       on Form 10-K for the year  ended December 31, 1993, in which
       this exhibit bore the same exhibit number.
<PAGE>


@@@@   Incorporated by reference  from  the Company's Annual Report
       on Form 10-K for the year  ended December 31, 1994, in which
       this exhibit bore the same exhibit number.

@@@@@  Incorporated by reference  from  the Company's Annual Report
       on Form 10-K for the year  ended December 31, 1995, in which
       this exhibit bore the same exhibit number.

@@@@@@ Incorporated by reference  from  the Company's Annual Report
       on Form 10-K for the year  ended December 31, 1996, in which
       this exhibit bore the same exhibit number.

#      Incorporated  by  reference  from  the  Company's  Quarterly
       Report on Form 10-Q for the quarterly period ended September
       30, 1994,  in  which  this  exhibit  bore  the  same exhibit
       number.

##     Incorporated  by  reference  from  the  Company's  Quarterly
       Report on Form 10-Q for the quarterly period ended September
       30, 1995,  in  which  this  exhibit  bore  the  same exhibit
       number.

###    Incorporated  by  reference  from  the  Company's  Quarterly
       Report on Form 10-Q for  the quarterly period ended June 30,
       1996, in which this exhibit bore the same exhibit number.

####   Incorporated by reference from the Company's Proxy Statement
       for Annual Meeting of Stockholders held on July 26, 1996.

^      Incorporated by reference from  the Company's Report on Form
       8-K dated May 27, 1997  in  which this exhibit bore the same
       exhibit number.

^^     Incorporated by reference from  the Company's Report on Form
       8-K dated July 18, 1997 in  which this exhibit bore the same
       exhibit number.

^^^    Incorporated by reference from  the Company's Report on Form
       8-K dated February 24, 1998  in  which this exhibit bore the
       same exhibit number.
<PAGE>