A number of fundamental issues must be considered in preparing the education system to produce more primary care physicians. Governmental controls and redirection of resources will force significant changes in the structuring of approaches to both undergraduate and graduate education in primary care. Particularly challenging will be restructuring and funding medical student programs in primary care, given a nearly certain requirement that more than 50% of medical school graduates enter primary care disciplines. Institutions will need to make strategic resource allocations to compete for the funding once the allocation process begins. Educational institutions will also face a cultural adaptation to primary care as an educational priority. This paper presents a model to study costs and funding for residency programs as they move from the traditional inpatient orientation to an outpatient focus. The authors suggest that for medical student education, the development of large academic health care systems may make funding primary care education more feasible.