I’m personally against lying, but let’s acknowledge a few uncomfortable truths here:
This individual’s lie was almost certainly motivated by fear that telling the truth would hurt their med school application.
Even many very honest people would lie if you put them in a position of having to choose between telling the truth and being allowed to pursue their dream career (a dream which may well be motivated by noble/altruistic reasons).
Most people in general tell lies, including some relatively consequential ones, over the course of their lives, and especially in early adult life at the age at which one would typically be applying to medical school.
This particular lie might not actually be so big if the disciplinary action the individual didn’t report was not significant enough to be reported on their transcript. (Considering this, one can even turn the question around and ask if it’s ethical for medical schools to ask questions that probe into unverifiable aspects of their applicants’ lives, creating an obvious temptation for lying.)
So, is reporting the dishonesty the right thing to do? That strikes me as a profoundly difficult ethics question. I don’t have an answer. [additional content from a previous version removed — see edit history for details]
Edit: the question has undergone some editing since I posted the answer, and my own update to the answer was also edited by well-meaning users who nonetheless modified my answer in a way I do not endorse.* I can’t keep up with this flurry of activity, so I’ve removed a part of my earlier answer. See the edit history.
Some content from an earlier edit (note: this references now-deleted comments so may not make complete sense): To OP: what I would say in view of the new information is that it’s still not an obvious decision, but I’ll grant that the argument in favor of reporting the dishonesty is stronger than I thought before.
At the same time, I noticed that in response to another answer you wrote a whole laundry list of misdeeds this person is supposedly guilty of, and that you “know” they will be dishonest as a physician. Well, I’m not in a position to argue, and you may well be right in this assessment. However, from an ethics perspective, it seems to me that whether you should report someone for the specific offense of lying on their med school application is quite a different ethics dilemma than whether you should try to sabotage their ambitions to become a doctor because of a whole list of other bad things you know about them, whose truth the medical school would likely be in no position to assess, and about which you might conceivably even be mistaken (quantitatively if not qualitatively).
Basically I’m saying, consider carefully your motivation here and whether it can ethically justify ruining this person’s career goals (assuming your actions will have that effect). There was another question on academia.se recently where someone asked if they should report their former roommate to the academic department that hired him for being generally a bad person, lying, cheating and whatnot. There was more or less a consensus that this would be quite inappropriate. I’m not saying it’s obvious that one should never warn schools about people with a bad character - again, what strikes me about your question is exactly how non-obvious it is what is the right thing to do in such a situation. But it’s something to think about very carefully at least.
* apparently this was done out of an objection to my use of the strikethrough formatting feature, which I find strange considering that this feature is offered by StackExchange, presumably implying that they approve of its use and believe some writers would find it useful.