Graduate medical education (GME) in the military services was investigated with respect to the following concerns: the maximum capacity of each military medical department to conduct GME programs in its own hospital; how these programs affect the recruitment and retention of military physicians; and the optimal sizes of such programs. It is suggested that since the Navy and the Air Force are both approaching a new era in which physician shortages will no longer be a problem, the size of the GME programs--along with other physician manpower policies affecting recruitment, retention, promotion, and assignment of physicians--will have to be adjusted to function in a period of likely surpluses of physicians in many specialties. Based on site visits, it was concluded that all three military medical departments probably have expanded their GME programs to the maximum capacity (based on currently available facilities and resources, including staff and patients) or slightly in excess of maximum capacity in some cases. The optimal size of the GME program is a function of the availability of the numbers and kinds of military physicians needed. Since the pertinent circumstances of each of the three medical departments are different, no basis was seen for assuming that all three departments should be required to operate with the same proportion of their active duty medical officers in GME status. It is recommended that the Department of Defense withdraw its 1977 directive to the three military medical departments to limit the fraction of active duty physicians in military GME assignments to not more than 20 percent of the active duty physicians strength in 1985. Maintaining high quality military GME and scholarships is addressed. A bibliography and sample interview guides are appended. (SW)