A bill to amend title XVIII of the Social Security Act with respect to payment for direct and indirect medical education costs under the medicare program and to amend title XIX of the Social Security Act with respect to payment for direct medical education costs under the medicaid program.

Title I: Payment for Medical Education Costs Under Medicare Program - Amends title XVIII (Medicare) of the Social Security Act to revise the payment methodology for direct medical education costs of hospitals. Directs the Secretary of Health and Human Services to determine, for each hospital with an approved medical residency training program, an approved full-time equivalent (FTE) resident amount for each residency year. Directs the Secretary to: (1) determine the average amount recognized as reasonable under Medicare for direct medical education costs of a hospital for each FTE resident; and (2) update each average amount based on charges in the consumer price index. Sets forth a formula for determining the hospital payment amount per resident. Directs the Secretary to establish rules for the computation of the number of FTE residents in an approved medical residency training program. Sets forth special rules for foreign medical graduates. Prohibits counting as a resident any individual who is a foreign medical school graduate, unless the individual has passed the Foreign Medical Graduate Examination in Medical Sciences. Requires a report to the Congress from the Secretary.

Revises the formula, under title XVIII, for determining the additional payment amount for hospitals with indirect costs of medical education. Directs the Secretary, in computing such amount to use an educational adjustment factor equal to: (1) nine percent in FY 1986 and (except as provided in subparagraph (2)) in each following fiscal year; and (2) eight percent in FY 1987 and each fiscal year thereafter, but only if, before the first day of that fiscal year, the Secretary has established a satisfactory adjustment to take into account the special needs of hospitals serving a significantly disproportionate share of patients who have low income or are entitled to benefits under part A (Hospital Insurance) of title XVIII.

Title II: Medical Education Costs Under Medicaid Program - Amends title XIX (Medicaid) of the Social Security Act to provide for a payment methodology for direct medical education costs that is essentially the same as that provided for Medicare under title I of this Act.

Requires the Secretary to report to the Congress by a specified time on the uniformity of approved FTE resident amounts.