In 1929, two Los Angeles doctors, Donald Ross and H. Clifford Loos, signed a contract under which 1,500 employees of the city's Department of Water and Power would pay $1.50 a month each to receive whatever medical care they needed from the two doctors.

Despite some difficulties and hostile opposition from local medical societies, the Ross-Loos Medical Group and others like it started in scattered places across the country survived and prospeted.

Today, with its own hospital, 175 doctors and 150,000 patient-members, Ross-Loos is only one of about 165 such prepaid group medical practices - commonly known as health maintenance organizations or HMOs - that provide health care to more than 6 million Americans.

After a half century of quiet but steady growth, these health maintenance organizations may now be on the verge of becoming an important competitive alternative to the traditional fee-for-service medical system that has long dominated American health care.

Last October, Health, Education and Welfare Secretary Joseph A. Califano Jr. said that HEW intends to "make it possible for every American citizen to have the option of joining a health maintenance organization."

The HEW officials who are drawing up proposals for some form of national health insurance are considering a plan that would rely heavily on health maintenance organizations to provide medical care and stimulate price competition.

Much of this enthusiasm for HMOs is a reaction to seemingly uncontroliable increases in the cost of medical care in recent years. After increasing at the rate of 15 per cent a year, doubling every five years, medical care costs now consume 8.6 per cent of the American gross national product and threaten to reach 10 per cent by the end of the decade.

Well-managed health maintenance organizations hold the promise of supplying their members comprehensive, quality medical care at less cost than is paid by people who buy conventional private health insurance to finance their medical care.

Since assuming office last January, the Carter administration has moved federal policy from support of health maintenance organizations as an experiment worth trying to an experience worth spreading. "HMOs offer competition to a system badly in need of it," Califano said in October. "They are demonstrating that they can compete - on a price and quality basis - with fee-for-service doctors and complex insurance policies that cover some fee-for-service medical and hospital care."

HMOs offer a broad base of medical and hospital care to members for a prepaid fee. It is the pepayment that most distinguishes health maintenance organizations from insurance companies. In many health maintenance groups, the member pays nothing - with some minor exceptions - beyond the flat monthly or annual fee, regardless of how much medical care and hospitalization may be required for treatment.

For the patient, belonging to a health maintainance organization means that he or she knows at the beginning of the year how much money will have to be paid out for medical expenses.

For the HMO's doctor or hospital, prepayment means new incentives and priorities. In the words of Dr. Cecil Cutting, former medical Group of Northern California, "It has always been a paradox that doctors and hospitals are dedicated to keeping people well and healthy, yet generally derive most of their income from sickness. By contrast, when prepayment is made directly to the providers of care, both the hospitals and the doctors are better off if the patient remains well."

By giving physicians their compensation at the beginning of the process, rather than at the end, and holding them, in some instances, liabile if costs exceed their budget, health maintenance organizations theoretically discourage unnecessary tests and procedures, encourage physicians to consider the cost of what they do, and limit unnecessary expensive hospitalization.

One complaint about the traditional fee-for-service system by cost-conscious critics is that physicians and hospitals have little incentive to consider the cost of what they do because they know that insurance companies, rather than the patients, will pay.

But in health maintenance organizations, the income of physicians is tied to the economic well-being of the plan.Prepayment gives the physician a reason to try to practice medicine economically.

Group practice also provides the opportunity to collect information on how individual physicians within the group practice and to compare them with their colleagues - how many tests are ordered, how often patients are hospitalized and for how long.

Although prepaid group medical plans are the most prevalent form of health maintenance organization, it is not the only type.

A second form is the individual practitioner association, or IPA, in which members are free to choose for care among individual physicians who belong to the plan, to which the fee is charged. Although IPAs theoretically offer many of the same advantages as HMOs, a principal shortcoming has been their inability to control hospitalization and tests ordered by physicians, which has often resulted in premiums substantially higher than paid in many group practice plans.

Supporters of health maintenance organizations cite a variety of statistics to make their case that prepaid group practices can deliver quality medical care at lower cost.

In northern California, for example, federal employees who belong to Kaiser will pay $13.07 every two weeks for the high option plan in 1978 while Blue Cross-Blue Shield coverage will cost federal workers in the same area $24.86.

The Kaiser plan is not unique in offering comprehensive care at a lower cost. In Seattle, the Group Health Cooperative of Puget Sound, and in Boston, the Harvard Community Health Plan, also offer medical care at rates lower than what Blue Cross-Blue Shield charges for its comparable, but still less comprehensive plan.

But in many other locations, pre-paid plans are more expensive than conventional insurance, even after the more comprehensive benefits are taken into account.

The most common complaint in prepaid plans across the country is that many patients have to wait hours or weeks - depending upon the kind of care - to get an appointment (shich is also often true, of course, with private physicians. Typically, a patient seeking a routine physical examination may have to wait six weeks for an appointment.Urgent problems are dealt with on the same day, but the patient may often not be able to see his or her own physician.

When patients have trouble seeing their own physician in a prepaid plan, treatment may not be consistent and problems with a patient's health may not be detected as early.

At its worst, medical care may be deficient in a poorly managed, improperly run plan. Even in better plans, patients occasionally complain that private physicians' amenities may be lacking.

There has been friction between the physicians and the administrators, which can adversely affect the quality of medical care.

Many supporters of health maintenance organizations agree that they do relatively little in the way of preventive medicine except to emphasize immunizations for children and remove financial barriers to early treatment of illness. Beyond that, the term health maintenance appears to be a misnomer.