This paper addresses key issues concerning the physician workforce and the financing of graduate medical education. The American College of Physicians recommends the establishment of a national advisory organization to develop a coherent and coordinated national policy on the health professions workforce. Given the increasing oversupply of physicians, the College recommends that no new medical schools be created, that total enrollment in U.S. medical schools not increase, and that the number of international medical graduates entering residency training in the United States be restricted. All health care payers should share the cost of graduate medical education, funding should be predictable and stable, and funding should include ambulatory training sites. The number of first-year residents should be linked more closely to the annual number of medical graduates in the United States, and Medicare payments for medical education and training should be made only to the health maintenance organizations that actually incur these costs. The College advises that hospitals providing care primarily to underserved populations and indigent persons need stable funding with which to pay for personnel to replace residents. The College calls for research to evaluate the feasibility of establishing a voucher system, in which each resident would receive payment authorization certificates to fund training at accredited residency sites. Additional research is also recommended to distinguish the individual costs involved in graduate medical education from other costs associated with graduate medical education and the costs of care of indigent persons.