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The new federalism is now taking hold in Washington, with far-reaching implications for the role of the federal government in health, education, and welfare programs; financial support for such programs; and the shift of control to the states. For telemedicine, the implications of these changes include having to make do with less external financial support and a need to establish partnerships between state and local governments, public sector developers and vendors, third-party payers, and community-based telemedicine programs. The long-term challenge for telemedicine programs, particularly in rural, medically underserved areas, is likely to be their sustainability in an adverse financial environment. The problem is further compounded by the lack of reimbursement for teleconsultations.