The Balanced Budget Act of 1997 promised a number of changes in medical education to benefit rural communities. The changes suggested that physician training would be more available in rural communities, programs training physicians for work in rural communities would be better supported, and residency programs would be allowed to be separate from hospitals. The regulations developed by the Health Care Financing Administration to implement the act are reviewed in the context of these expectations. Limitations in the regulations indicate that rural communities will see little benefit from this legislation. This article is a commentary on the expectations and reality of the effects of the Balanced Budget Act of 1997 on rural training supported by Medicare.