KICKBACKS, OR REBATES, ARE THE PRACTICE WHEREBY PROVIDERS ARE FORCED TO PAY A CERTAIN PERCENTAGE OF FEES RECEIVED FROM MEDICAID BACK TO OTHERS FOR THE PRIVILEGE OF PROVIDING SUCH SERVICES TO PATIENTS. KICKBACKS APPEAR TO BE THE MOST COMMON KIND OF MEDICAID FRAUD WHOSE WIDESPREAD USE IS APPARENT IN EVIDENCE FROM SIX STATES (CALIF., FLA., WISC., ILL., UTAH, AND N.Y.), INTERVIEWS WITH PHYSICIANS, AND QUESTIONNAIRES TO PHARMACISTS. FOR EXAMPLE, TYPES OF ABUSES BY NURSING HOMES INCLUDED (1) REQUIRING CASH PAYMENTS, OFTEN AS A PERCENTAGE OF THE GROSS SALES; (2) REQUIRING PHARMACISTS TO GRANT EXCESSIVE CREDIT; AND (3) REQUIRING RENTAL OF SPACE IN THE NURSING HOME (SUCH AS $1,000 FOR A CLOSET). PHYSICIANS, LABORATORIES, AND MEDICAL CENTER OPERATORS OFTEN RECEIVED KICKBACKS. NURSING HOME OPERATORS ALSO OBTAINED KICKBACKS FROM CLINICAL LABORATORIES, VENDORS AND SUPPLIERS, AND CONTRACT CLEANING SERVICES. DESPITE THESE ABUSES, ONLY ONE CASE PROSECUTED UNDER THE 1972 LAW HAS RESULTED IN A CONVICTION. FROM JULY 1974 THROUGH JUNE 1975 ONLY ONE CASE OF KICKBACKS WAS REPORTED TO THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE. MOREOVER, THE LAW MAKES A VIOLATION ONLY A MISDEMEANOR. IT IS RECOMMENDED THAT (1) KICKBACKS BE MADE FELONIES, (2) THE JUSTICE DEPARTMENT TRY TO RECOVER FUNDS OBTAINED FRAUDULENTLY, (3) THE INTERNAL REVENUE SERVICE ANALYZE TAX RETURNS OF HIGH INCOME MEDICARE AND MEDICAID PROVIDERS, (4) CONGRESS FUND INVESTIGATORS AND AUDITORS FOR THE STATES, AND (5) ALL AUTHORITIES MAKE AGGRESSIVE EFFORTS TO ELIMINATE MEDICAID KICKBACKS. FOOTNOTES ARE INCLUDED. (CFW)