KANSAS CITY, MO., AUG. 11 -- Big money has caused big problems in college athletics. Now the NCAA wants to use money as an instrument of reform. That's the idea behind a complicated formula for distributing the $1 billion CBS will start paying next year for the men's basketball tournament.

If the plan is approved this week by the NCAA executive committee, schools will be rewarded less for won-loss record and more for general support of sports and commitment to athletic scholarships.

The new system would include free catastrophic injury insurance for college athletes, increased per diem allowances for tournament teams and at least a small slice of the pie for Division II and III schools.

In addition, all Division I schools would receive an outright grant to be used for "academic enhancement." "Academic enhancement is something all institutions are going to benefit from regardless of academic achievement," said Judy Sweet, head of a special committee set up to recommend ways of distributing the $1 billion.

The seven-year, $1 billion CBS deal doubles previous rights fees for the 64-team basketball tournament, which has grown tremendously in popularity and profitability. Last year, for example, each school in the Final Four received nearly $1.5 million. In 1980, the national semifinalists got $326,378 each.

The new plan would create two revenue "pools" -- one based on a conference's performance in the tournament the previous six years and another based on the number of athletic scholarships a school offers plus academic considerations.

Conferences would come up with formulas to distribute their money.