The major objectives of health policy reform include efficiency, equity, quality improvement and need of insurer¡¦s health services . For those goal ,the capitation payment is used . The result of insurer¡¦s privilege may be victimized if the competitive health insurance market has not any norm, So some nations have already introduced risk adjustment to their health care reform, because risk adjustment may achieve both goal of equity and efficiency . This study is using 3 years medical expenditure of a isolated area as analysis unit, data duration from 2000 to 2003. the purpose of study intends to develop a risk-adjusted capitation rates using demographic ¡Bcatastrophic factor and prior utilization factors. The results show the model with only age and gender factor has R2 5.69%¡BAdj-R2 5.65%. On the other hand, the model accommodating catastrophic factor has R2 11.71%¡BAdj-R2 11.67%¡Athe model accommodating 1~2 year prior utilization has R2 43.14%¡B45.57%¡BAdj-R243.11%¡B45.54%¡C