The health care market, the organizations that deliver health care, and health care payment mechanisms have all changed significantly in recent years and continue to change. In contrast, the so-called antikickback provision of the fraud and abuse statute remains much as it was in 1977, when it was amended into its current general form. By prohibiting financial incentives to induce referrals, the antikickback law counters abuses to the Medicare and Medicaid programs that are likely to proliferate in a cost-based, fee-forservice (FFS) health care market. In a FFS system, financial incentives stimulate increased use of services and often result in overutilization. The antikickback section has significantly less relevance to a capitated health care system in which the payment system itself inhibits overutilization and other costly practices. However, the antikickback section is broad and the regulatory safe harbors promulgated under it are narrow. As a result, practices such as capitation, which encourage cost-effective care and the formation of organizations to provide care on a capitated basis, are poorly insulated from the strictures of the statute.