A bill to reform reimbursement under Medicare for medical education and to create a direct grant program to qualifying institutions for graduate medical education.

Amends title XVIII (Medicare) of the Social Security Act to: (1) exclude from the determination of reasonable cost the direct costs of approved graduate medical education programs; and (2) include in the determination of reasonable cost the costs of other clinical training activities (including nursing).

Directs the Secretary of Health and Human Services to make grants for the purpose of assisting hospitals in carrying out approved graduate medical education programs. Entitles each qualified institution to a direct grant for the fiscal year in which it applies for the grant. Sets forth a formula for determining the size of the hospital's grant. Limits the total amount which the Secretary may use to make such direct grants.