Medical school admissions decisions have been responsive to federal policies and social concerns regarding equality of access for women and minorities. State schools and state-supported private schools discriminate in favor of residents. Primary care physicians are choosing specialty training. The more ambulatory care this training includes and the earlier it is introduced, the higher its costs. Limitations of cost allocation in joint production precludes any unambiguous determination of education costs. Strong interdependencies among patient care, research, and education mean strong interdependencies between federal decisions in health manpower and other health care areas. Capitation grants succeeded financial distress grants for financing medical school operating costs, but they could not affect factors underlying past financial difficulty. Academic health centers would react to cutbacks in institutional support by seeking replacement funds and altering programs; replacement funds will come from tuition increases, state appropriations, and clinical faculty practice earnings. Greater reliance on faculty earnings will require that clinical care in teaching hospitals be oriented away from primary care. 100 pp.