Washington, D. C. 20549

                            Form 10-K/A


[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)
<PAGE>


    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 June 22, 1998:


      Common Stock, $.01 par value - $127,718,340


    The number  of  shares  outstanding  of  each  of  the issuer's
classes of capital stock, as of June 22, 1998:


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


  

                  DOCUMENTS INCORPORATED BY REFERENCE

                              None. 

<PAGE>



Item 6. Selected Financial Data
        -----------------------
<TABLE>
<CAPTION>
                                                                 For The Years Ended December 31,
                                                                 --------------------------------
<S>                                                      <C>        <C>       <C>        <C>        <C>
(Amounts in thousands except per share and 
 membership data)
                                                            1997      1996      1995       1994       1993
                                                         ---------  --------  ---------  --------   --------
                                                         (Restated)           (Restated)

REVENUES................................................ $ 663,823  $562,765  $ 467,344  $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)..     9,000                                  
                                                         ---------  --------  ---------  --------   --------     
TOTAL EXPENSES..........................................   696,322   553,038    459,534   425,779    439,773     
                                                         ---------  --------  ---------  --------   --------     
INCOME (LOSS) FROM OPERATIONS...........................   (32,499)    9,727      7,810     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 ......................   (25,081)   16,158     14,051     9,677      3,017     

INCOME TAX BENEFIT......................................               3,267      3,625     3,658      2,571     
                                                         ---------  --------  ---------  --------   --------
NET INCOME (LOSS).......................................   (25,081)   19,425     17,676    13,335      5,588     

PREFERRED STOCK DIVIDENDS...............................                                   (5,280)    (5,400)    
                                                         ---------  --------  ---------  --------   --------
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS...... $ (25,081) $ 19,425  $  17,676  $  8,055   $    188     
                                                         =========  ========  =========  ========   ========

NET INCOME (LOSS) PER COMMON SHARE (2):
Basic:
  Basic earnings (loss) per common share................ $   (1.40) $   1.11  $    1.09  $    .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.............. $   (1.40) $   1.05  $     .97  $    .76   $    .02
                                                         =========  ========  =========  ========   ========
  Weighted average number of common and common
   dilutive potential shares outstanding................    17,897    18,415     18,137    17,581     10,025

                                                                          At December 31,
                                                                          ---------------

                                                            1997       1996      1995       1994       1993  
                                                         ---------  --------- ---------  ---------  ---------
                                                                    (Restated)(Restated) 
BALANCE SHEET DATA:
  Total assets.........................................  $ 167,422  $ 174,522 $ 152,836  $ 128,692  $ 106,807
  Total indebtedness (3)...............................  $  86,386  $  68,276 $  68,131  $  63,342  $  54,422
  Shareholders' equity.................................  $  81,036  $ 106,246 $  84,705  $  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 $6.0 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 by a subsidiary of the
      Company (see "Item 8. Financial Statements  and  Supplementary  Data - Note 10 to the Company's
      Consolidated Financial  Statements").    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 $25.1 million for the year ended
December  31,  1997  after   recording   a  $6.0  million  non-cash
litigation  charge   (see   "Item   8.   Financial  Statements  and
Supplementary  Data  -  Note   10  to  the  Company's  Consolidated
Financial Statements") 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  $1.40 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  per  member  per  month ("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.   For the foreseeable future it
is anticipated that the  average  governmental premium revenue PMPM
will decline as the expected membership growth in the lower premium
revenue PMPM Medicaid line of business is anticipated to exceed the
membership growth in the higher  premium revenue PMPM Medicare line
of business.

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.  For the  foreseeable  future  it is anticipated that the
Company will continue to experience higher prescription drug costs;
however, the Company will  be  implementing enhanced procedures and
controls  in  mid  1998  to  promote  cost  effective  use  of  its
prescription drug benefit.

Marketing, general and administrative ("M,G&A") expenses were $55.7
million for the year ended December 31, 1997 as compared to $48.8
<PAGE>

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 $6.0 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 $5.0 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
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 $17.7  million for 1995 (see "Item 8.
Financial Statements  and  Supplementary  Data  -  Note  10  to the
Company's Consolidated  Financial  Statements").    Net  income per
common share on  a  diluted  basis  was  $1.05  for  the year ended
December 31, 1996 compared to $.97 for 1995.

For the year ended December 31, 1996, the Company reported revenues
of $562.8 million,  an  increase  of  $95.4  million  or 20.4% 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 $49.6 million  or  85.2%  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
<PAGE>
 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  1.9 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
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  9.4%  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,
<PAGE>

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").

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/A  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
<PAGE>

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 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  $25.1 million which included a $6.0
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.

As discussed further in  Note  10  to the financial statements, the
Company has restated its financial statements for the periods ended
December 31, 1995,  1996,  1997.    The  restatement  resulted in a
reduction in 1995 income of $10 million and a reduction of the loss
for 1997 by $10  million.    Total  assets and shareholders' equity
were reduced by $10 million at each of December 31, 1995 and 1996.


                                   ERNST & YOUNG LLP


Los Angeles, California
February 6, 1998, except Note 5
which date is February 28, 1998
and Note 10 which date is June 12, 1998
<PAGE>

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

<TABLE>
<CAPTION>

                                                                   December 31,
                                                                1997         1996  
                                                             ---------    ---------
<S>                                                          <C>          <C>
                                                                          (Restated)
CURRENT ASSETS
  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       23,107
  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      158,605
                                                             ---------    ---------
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    $ 174,522
                                                             =========    =========
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)    (143,734)
                                                             ---------    ---------
   
    TOTAL SHAREHOLDERS' EQUITY..............................    81,036      106,246
                                                             ---------    ---------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 167,422    $ 174,522
                                                             =========    =========



                      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>
                                                       (Restated)            (Restated)
REVENUES
   Commercial premiums................................ $ 457,628  $ 447,151  $ 408,901
   Governmental premiums..............................   200,452    107,819     58,229
   Other income.......................................     5,743      7,795        214
                                                       ---------  ---------  ---------
     TOTAL REVENUES...................................   663,823    562,765    467,344
                                                       ---------  ---------  ---------
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 - Notes 9 and 10..........................     9,000                     
                                                       ---------  ---------  ---------
     TOTAL EXPENSES...................................   696,322    553,038    459,534
                                                       ---------  ---------  ---------
INCOME (LOSS) FROM OPERATIONS.........................   (32,499)     9,727      7,810

   Investment income..................................     7,481      6,528      6,299
   Interest expense...................................       (63)       (97)       (58)
                                                       ---------  ---------  ---------
INCOME (LOSS) BEFORE INCOME TAXES.....................   (25,081)    16,158     14,051

INCOME TAX BENEFIT....................................                3,267      3,625
                                                       ---------  ---------  ---------
NET INCOME (LOSS)..................................... $ (25,081) $  19,425  $  17,676
                                                       =========  =========  =========

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

Basic:
  Basic Earnings (Loss) Per Common Share.............. $   (1.40) $    1.11  $    1.09
                                                       =========  =========  =========
  Weighted average number of common shares 
   outstanding........................................    17,897     17,520     16,158
                                                       =========  =========  =========

Diluted:
  Diluted Earnings (Loss) per Common Share............ $   (1.40) $    1.05  $     .97
                                                       =========  =========  =========
  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>         <C>
                                                                  (Restated)             (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................ $ (25,081) $  19,425   $  17,676
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................     9,000  
  Changes in assets and liabilities:
    Increase in accounts receivable..............................    (7,917)      (161)     (4,632)
    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>


 
                                  Number of            Number of          Additional           
                                  Preferred Preferred   Common    Common   Paid-in             Accumulated
                                   Shares     Stock     Shares     Stock   Capital     Other     Deficit     Total 
                                  --------  ---------  ---------  ------  ----------  -------  ----------- --------
<S>                               <C>       <C>        <C>        <C>     <C>        <C>       <C>         <C>
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 (Restated)..........                                                                 17,676     17,676
                                    -----      -----    ------     ----   ---------   -------  ---------    -------

Balances at December 31, 1995
  (Restated).....................       0          0    17,420      174     247,690             (163,159)    84,705

  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
  (Restated).....................       0          0    17,565      176     249,804             (143,734)   106,246
                                                                                                           

  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 (Restated)............                                                                (25,081)   (25,081)
                                    -----      -----    ------     ----    --------   -------  ---------   --------

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>
                                        1997                        1996          
                                ----------------------     -----------------------
                                             Estimated                   Estimated
                                Amortized      Fair        Amortized       Fair
(Amounts in thousands)            Cost         Value         Cost          Value  
                                ---------    ---------     ---------     ---------
<S>                             <C>          <C>           <C>           <C>
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     $23,330
  Allowance for retroactive
    billing adjustments..................  (6,926)     (5,112)
                                          -------     -------
  Premiums receivable, net...............  21,637      18,218

  Other..................................   4,387       4,889
                                          -------     -------
  Accounts receivable, net............... $26,024     $23,107
                                          =======     =======

Premiums receivable included as  of  December 31, 1996 an estimated
$5.0 million for amounts due the  Company with respect to the prior
operation of a governmental managed care program by a subsidiary of
the Company.  This receivable was written off by the Company in the
first quarter of 1997 in  conjunction  with the recording of a $6.0
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>
                                                         Years ended December 31,
                                                      1997         1996        1995      
                                                    --------     --------    --------
<S>                                                 <C>          <C>         <C>
                                                    (Restated)               (Restated)
Basic earnings (loss) per common share:             

Numerator - Net income (loss).....................  $(25,081)    $ 19,425    $ 17,676
                                                    ========     ========    ========
Denominator - 
  Weighted average number of common shares 
    outstanding....................................   17,897       17,520      16,158
                                                    ========     ========    ========

Basic earnings (loss) per common share............. $  (1.40)    $   1.11    $   1.09
                                                    ========     ========    ========


Diluted earnings (loss) per common share:

Numerator - Net income (loss)...................... $(25,081)    $ 19,425    $ 17,676
                                                    ========     ========    ========
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........... $  (1.40)    $   1.05    $    .97
                                                    ========     ========    ========


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

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.
<PAGE>


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  
                                --------  -------   -------
                                (Restated)          (Restated)
Pro forma net income (loss)     $(28,047) $17,211   $17,623

Pro forma earnings (loss) per
common share:
  Basic                         $  (1.57) $   .98   $  1.09
  Diluted                       $  (1.57) $   .93   $   .97

<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)  $(101,212)  $(106,117)
Depreciation.................     (1,540)     (1,371)     (1,316)
Other........................     (3,207)     (3,075)     (2,568)
                               ---------   ---------   ---------

Gross deferred tax assets....   (115,646)   (105,658)   (110,001)
                               ---------   ---------   ---------

Deferred tax assets valuation
  allowance.................      97,585      87,658      96,001
                               ---------   ---------   ---------

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................. $ (8,528) $ 5,494   $ 4,777
State income taxes..................       73      215       139
Exercise of nonqualified stock
  options...........................   (1,755)    (809)     (577)
Benefit of NOL carryforwards........            (4,167)   (3,964)
Anticipation of future benefit of 
  NOLs..............................      (61)  (4,000)   (4,000)
Limitation on current-year tax
  benefit due to unrealized NOL
  carryforwards.....................   10,271
                                     --------  -------   -------

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


The Company's net operating  loss (NOL) carryforwards increased due
to a $29  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                     $ 184.5
            2004                        94.5
            2005                         1.4
            2006                         2.6
            2007                         1.6
            2012                        29.0
                                     -------
         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 determined its annual
<PAGE>

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  $45  million  of the pre-
change  NOLs  for  federal  income  tax  return  purposes  and  has
recognized  approximately  $94  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")
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
<PAGE>

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 management restructuring charge recorded
in 1997 (see Note 9 - Management Restructuring Charge).

NOTE 9 - MANAGEMENT RESTRUCTURING CHARGE

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.

NOTE 10 - LITIGATION CHARGE AND RESTATEMENT

From March 1, 1986 through  June  30, 1989, Penn Health Corporation
("Penn Health"), a subsidiary  of  the Company, contracted with the
Commonwealth of  Pennsylvania,  Department  of  Public Welfare (the
"DPW") to provide a full  range  of managed health care services to
approximately  86,000  Medicaid  enrollees  under  the Pennsylvania
Medical Assistance Program  known  as  the  HealthPass Program (the
"DPW  Contract").    Pursuant  to  the  DPW  Contract,  Penn Health
arranged and paid for  the  provision  of  covered medical care and
services to eligible Medicaid recipients enrolled in the HealthPass
Program.  The Company  has  been  in  litigation with the DPW since
1990 in connection with its  claims  for  amounts due by the DPW of
approximately  $29  million  plus  interest  owing  under  the  DPW
Contract.  Based upon  an  evaluation  of  this matter, the Company
recorded in the fourth quarter of  1995 a $10 million increase from
$5 million to $15 million  for  the  estimated amounts due from the
DPW.   In  March  1997  the  Company  received  a  ruling  from the
Commonwealth of Pennsylvania Board  of  Claims (the "Claims Board")
that Penn Health was  not  entitled  to  any recovery on its claims
against the DPW.    Accordingly,  the Company recorded in the first
quarter of 1997 a $16.0 million non-cash litigation charge to fully
reserve for the recorded estimate  of $15.0 million due the Company
from the  DPW  and  related  litigation  costs.    It  has now been
determined that the $10.0 million increase to the estimated amounts
due the Company from  the  DPW  should  not  have been reflected as
other income in the 1995 financial  statements.    As a result, the
$10.0 million of  other  income  previously  recorded in the fourth
quarter of 1995 has  been  adjusted  and  restated to zero, and the
previously recorded litigation charge of $16.0 million reflected in
the first quarter of 1997  has  been  adjusted and restated to $6.0
million.    This  restatement  has  resulted  in  a decrease in the
previously recorded net  loss  of  $35.1  million  ($1.96 basic and
diluted per share)  for  1997  to  $25.1  million  ($1.40 basic and
diluted per share), and a  decrease  in the previously recorded net
income of $27.7 million ($1.71  basic  and $1.53 diluted per share)
for 1995 to $17.7 million ($1.09 basic and $.97 diluted per share). 
<PAGE>

Total assets and shareholders' equity  as of December 31, 1996 have
correspondingly been adjusted and  restated  by a decrease of $10.0
million from the previously recorded balances of $184.5 million and
$116.2 million to $174.5  million and $106.2 million, respectively.
The  aforementioned  adjustments  had  no  effect  on  the recorded
balances of total assets  and  shareholders'  equity as of December
31, 1997  and  are  non-cash  adjustments  that  do  not impact the
Company's previously reported cash flows for any of the restatement
periods.  On April 24, 1997,  the  Company filed an appeal with the
Commonwealth of Pennsylvania Commonwealth Court seeking to overturn
the Claims 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. In
addition, the Company is pursuing claims relating to this matter in
the Bankruptcy  Court  in  California.    The  Company believes the
resolution of these  matters  and  the  Penn Health bankruptcy case
will  not  adversely  impact  the  Company's  ongoing  business and
operations.
<PAGE>



Quarterly Results of Operations (Unaudited)

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


(Amounts in thousands,                                  Three months ended,
except per share data)                     ---------------------------------------------
---------------------                      March 31     June 30     Sept 30     Dec 31  
                                           ---------   ---------   ---------   ---------
<S>                                        <C>         <C>         <C>         <C>
                                           (Restated)
1997
----

Revenues                                   $154,496    $163,070    $171,716    $174,541

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

Net income (loss)                                91       4,229     (17,988)    (11,413)

Net income (loss) per common share:
  Basic                                    $    .01    $    .24    $  (1.00)   $   (.64)
  Diluted                                  $    .00    $    .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 $6.0 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 $5.0 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 by a subsidiary of  the  Company,  and  related litigation costs (see "Item 8.
    Financial Statements  and  Supplementary  Data  -  Note  10  to  the Company's Consolidated
    Financial Statements").  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 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

23.1a  Consent of Independent Auditors - Ernst & Young LLP
<PAGE>

27.95  Restated Financial Data Schedule for the year ended December
       31, 1995

27.96  Restated Financial Data Schedule for the year ended December
       31, 1996

27.97  Restated 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***

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.
<PAGE>


#        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>


                             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.



    June 24, 1998                       /s/ Richard A. Link
    --------------                    ------------------------
         Date                             Richard A. Link
                                       Chief Financial Officer

                                      
<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>
                                                                               (Restated)
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     50,473
OTHER LONG-TERM ASSETS..............................................      229        267
                                                                     --------  ---------
     TOTAL ASSETS................................................... $ 89,028  $ 113,103
                                                                     ========  =========

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    106,246
                                                                     --------  ---------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................... $ 89,028  $ 113,103
                                                                     ========  =========





                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>
                                                             (Restated)            (Restated)
REVENUES
  Equity in earnings (losses) of subsidiaries............... $ (25,021) $  1,287   $   8,318
  Service agreement income..................................    10,865    11,572      11,115
  Other income..............................................     1,988     6,728   
                                                             ---------  --------   ---------
     TOTAL REVENUES.........................................   (12,168)   19,587      19,433
                                                             ---------  --------   ---------
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...............................   (27,816)    6,843       4,299

  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...........................   (25,508)    8,481       5,456

INCOME TAX BENEFIT..........................................       427    10,944      12,220
                                                             ---------  --------   ---------
NET INCOME (LOSS)........................................... $ (25,081) $ 19,425   $  17,676
                                                             =========  ========   =========






                 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
                                                         ---------  --------   ---------
<S>                                                      <C>        <C>        <C>
                                                         (Restated)            (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ (25,081) $ 19,425   $  17,676
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) losses of subsidiaries...........    25,021    (1,287)     (8,318)
  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
</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
                                                         ---------  --------   ---------
<S>                                                      <C>        <C>        <C>
                                                         (Restated)            (Restated)
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>

Column A                   Column B               Column C              Column D        Column E
--------                  ----------      --------------------------   ----------     -------------
                                                  Additions
                                          --------------------------
<S>                       <C>             <C>         <C>              <C>
                          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.
</TABLE>



                                 For the Year Ended December 31, 1996

<TABLE>
<CAPTION>
Column A                   Column B               Column C              Column D        Column E
--------                  ----------      --------------------------   ----------     -------------
                                                  Additions
                                          --------------------------
<S>                       <C>             <C>         <C>              <C>            <C>
                          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.


</TABLE>
<PAGE>


                                     MAXICARE HEALTH PLANS, INC. 

                            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                                        (Amounts in thousands)

                                 For the Year Ended December 31, 1995
<TABLE>
<CAPTION>

Column A                   Column B               Column C              Column D        Column E
--------                  ----------      --------------------------   ----------     -------------
                                                  Additions
                                          --------------------------
<S>                       <C>             <C>         <C>              <C>            <C>
                          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>