Title IV, SEC. 4051. TRANSFERS FROM MEDICARE TRUST FUNDS FOR GRADUATE MEDICAL EDUCATION. (a) In General. For purposes of complying with section 3034(a), there shall be transferred to the Secretary from the Federal Hospital Insurance Trust Fund (established under section 1817 of the Social Security Act) and the Federal Supplementary Medical Insurance Trust Fund (established under section 1841 of such Act) the following amount (in the aggregate), as applicable to a calendar year: (1) In the case of a calendar year prior to 1998, the proportion of the amounts expended from such Trust Funds during the most recent fiscal year ending before the first day of such calendar year for payments for the direct costs of graduate medical education under section 1886(h) of such Act that is attributable to payments to hospitals located in the States that are participating States for the calendar year. (2) In the case of calendar year 1998, the amount expended from such Trust Funds during fiscal year 1997 for payments for such direct costs of graduate medical education. (3) In the case of each subsequent calendar year, the amount specified in paragraph (2) increased by the product of such amount and the general health care inflation factor (as defined in section 6001(a)(3), except that for purposes of this subparagraph the increases provided for in subparagraphs (A) through (C) of such section shall not be made). (b) Allocation of Amount Among Funds. With respect to the amount required under subsection (a) to be transferred for an academic year from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund, the Secretary shall determine an equitable allocation of such amount among the funds. (c) Termination of Graduate Medical Education Payments Under Medicare. (1) In General. Section 1886(h) (42 U.S.C. 1395ww(h)) is amended by adding at the end the following new paragraph: ``(6) Termination of payments attributable to costs of training physicians. Notwithstanding any other provision of this section or section 1861(v), no payment may be made under this title for direct graduate medical education costs attributable to an approved medical residency training program for any cost reporting period (or portion thereof) beginning on or after January 1, 1998 (or, in the case of costs of a program operating in a State that is a participating State under the Health Security Act for a year prior to 1998, on or after January 1 of the first year for which the State is such a participating State).''. (2) Prohibition against recognition of costs. Section 1861(v)(1) (42 U.S.C. 1395x(v)(1)) is amended by adding at the end the following new subparagraph: ``(T) Such regulations shall not include any provision for specific recognition of the costs of graduate medical education for hospitals for any cost reporting period (or portion thereof) beginning on or after January 1, 1998 (or, in the case of a hospital located in a State that is a participating State under the Health Security Act for a year prior to 1998, ending on or before December 31 of the year prior to the first year for which the State is such a participating State). Nothing in the previous sentence shall be construed to affect in any way payments to hospitals for the costs of any approved educational activities that are not described in such sentence.''.