Financing and cost factors in medical education and the effect of the many missions of a medical school on funding issues are discussed. The teaching mission of medical schools includes undergraduate medical education (preparation for the MD degree), graduate medical education (training of resident physicians), biomedical specialist education, continuing medical education, and education for other health professions. Medical school research can be categorized as basic, clinical, socioepidemiological, and related to health service, while the services medical schools provide can include general and tertiary patient care, specialized centers, consultation, and miscellaneous services such as staff development or public information programs. The cost of medical education is complex because of the blend of missions and because activities for the different areas may be carried out by the same staff persons. States often base funding on formula concepts and on the notion that the medical schools' only mission is undergraduate medical education. The complexities of medical schools and their related academic health centers often are not realized. Additional consideration is given to factors which affect medical school funding and costs: missions; sponsorship; medical schools' relationships with parent universities, academic health centers, and teaching hospitals; demographic characteristics of medical schools; and local administrative decisions. (SW)