diff --git a/changelog.d/medicare-noninstitutional-spending.fixed.md b/changelog.d/medicare-noninstitutional-spending.fixed.md
new file mode 100644
index 00000000000..6d446f54b84
--- /dev/null
+++ b/changelog.d/medicare-noninstitutional-spending.fixed.md
@@ -0,0 +1 @@
+Scale Medicare spending per enrollee to enrollees who do not live in nursing homes in medicare_gross_cost, medicare_cost, cbo_medicare_benefit and qmb_cost_sharing, since the survey data exclude nursing home residents.
diff --git a/policyengine_us/parameters/calibration/gov/hhs/medicare/noninstitutionalized_spending_ratio.yaml b/policyengine_us/parameters/calibration/gov/hhs/medicare/noninstitutionalized_spending_ratio.yaml
new file mode 100644
index 00000000000..b23188632ec
--- /dev/null
+++ b/policyengine_us/parameters/calibration/gov/hhs/medicare/noninstitutionalized_spending_ratio.yaml
@@ -0,0 +1,63 @@
+description: PolicyEngine multiplies Medicare spending per enrollee by this ratio of Medicare spending per enrollee who is not a long-stay nursing home resident to Medicare spending per enrollee, because the household survey data exclude people living in nursing homes.
+metadata:
+  unit: /1
+  period: year
+  label: Medicare noninstitutionalized spending ratio
+  reference:
+  # Medicare spending per enrollee (per_capita_cost) averages over every
+  # enrollee, including nursing home residents, whom the Current Population
+  # Survey does not sample. In 2022, among beneficiaries in fee-for-service
+  # Medicare, annual Part A and Part B program spending averaged $31,200 for
+  # long-stay nursing home residents and about $11,300 for other
+  # beneficiaries (June 2025, file page 9), and long-stay residents were 1.7
+  # percent of beneficiaries (October 2024, file page 5; 1.7 percent again in
+  # 2023, June 2025, file page 8). A long-stay resident had been in a nursing
+  # home for more than 90 days in at least one month of the year. So spending
+  # per other beneficiary relative to spending per beneficiary is
+  # 1 / (1 + 0.017 * (31_200 / 11_300 - 1)) = 0.971. The preliminary October
+  # 2024 slide described long-stay residents' spending as about two times
+  # higher; the June 2025 report's dollar figures, almost three times as
+  # high, replace that description.
+  #
+  # The ratio is measured for fee-for-service Parts A and B and applied to
+  # all Medicare spending per enrollee, including Medicare Advantage, Part D
+  # and administration. With fee-for-service enrollment shares instead (62
+  # percent of long-stay residents and 53 percent of others in 2023, June
+  # 2025, file page 13) it is 0.966; pricing Medicare Advantage at the
+  # long-stay residents' risk score ratio (2.12 / 1.01, October 2024, file
+  # page 5) gives about 0.975. The long-stay share was 2.6 percent in 2013
+  # (June 2025, file page 8), but MedPAC publishes relative spending for 2022
+  # only, so the 2022 ratio applies to every year from 2013, the first year of
+  # per_capita_cost.
+  - title: "Medicare Payment Advisory Commission, Report to the Congress, June 2025, Chapter 5, Medicare beneficiaries in nursing homes #page 8-9,13"
+    href: https://www.medpac.gov/wp-content/uploads/2025/06/Jun25_Ch5_MedPAC_Report_To_Congress_SEC.pdf#page=8
+  - title: Medicare Payment Advisory Commission, Medicare beneficiaries in nursing homes, October 2024 public meeting
+    href: https://www.medpac.gov/wp-content/uploads/2023/10/Beneficiaries-in-Nursing-Homes-MedPAC-Oct-2024-SEC.pdf#page=5
+  # The Current Population Survey samples housing units and some
+  # noninstitutional group quarters; institutional group quarters such as
+  # nursing homes have never been part of its sample. The census counts
+  # nursing facility patients at the facility, but counts residents of
+  # assisted living facilities and of housing for older adults, such as
+  # retirement communities, at the residence where they live and sleep most
+  # of the time (sections C.11(c), C.11(d) and C.12).
+  - title: U.S. Bureau of Labor Statistics, Handbook of Methods, Current Population Survey, Design
+    href: https://www.bls.gov/opub/hom/cps/design.htm
+  - title: "U.S. Census Bureau, Final 2020 Census Residence Criteria and Residence Situations, 83 FR 5525 #page 10-11"
+    href: https://www.govinfo.gov/content/pkg/FR-2018-02-08/pdf/2018-02370.pdf#page=10
+  # The Medicare Current Beneficiary Survey's long-term care facilities
+  # include retirement homes, personal care facilities and assisted and
+  # foster care homes as well as nursing homes (Appendix B). Excluding
+  # everyone living in one at the fall interview gives a larger gap: in
+  # 2013, community residents' Medicare benefit payments per capita were
+  # 0.92 of the average over all beneficiaries (Table 4.1 over Table 1.1).
+  - title: Centers for Medicare and Medicaid Services, Characteristics and Perceptions of the Medicare Population, 2013, Tables 1.1 and 4.1 and Appendix B
+    href: https://www.cms.gov/research-statistics-data-and-systems/research/mcbs/downloads/2013_characteristics_and_perceptions.zip
+  # CBO also removes institutionalized enrollees' benefits before assigning
+  # Medicare's average cost to survey respondents (file page 46). It holds
+  # the institutional share of Medicare benefits other than the low-income
+  # subsidy at its 2012 level from 2013 (file page 52), where this parameter
+  # instead holds the ratio of spending per person constant.
+  - title: "Congressional Budget Office, Working Paper 2018-07, How CBO Adjusts for Survey Underreporting of Transfer Income in Its Distributional Analyses #page 46,52"
+    href: https://www.cbo.gov/system/files/2018-07/54234-workingpaper.pdf#page=46
+values:
+  2013-01-01: 0.971
diff --git a/policyengine_us/tests/core/test_cbo_medicare_benefit_series.py b/policyengine_us/tests/core/test_cbo_medicare_benefit_series.py
index c9b916752ce..397f5aa454e 100644
--- a/policyengine_us/tests/core/test_cbo_medicare_benefit_series.py
+++ b/policyengine_us/tests/core/test_cbo_medicare_benefit_series.py
@@ -3,11 +3,12 @@
 CBO counts Medicare in household income at the government's average cost
 per enrollee, net of premiums paid by enrollees, and counts the Part D
 low-income subsidy separately. ``cbo_medicare_benefit`` takes CMS Medicare
-spending per enrollee (``calibration.gov.hhs.medicare.per_capita_cost``) and
-subtracts four series under ``calibration.gov.hhs.medicare``, each an
-aggregate from the Medicare Trustees Reports over Table V.B3's total
-enrollment (people with Part A and/or Part B). From 2015 they come from the
-2026 report:
+spending per enrollee (``calibration.gov.hhs.medicare.per_capita_cost``) less
+the low-income subsidy, scales it to enrollees outside nursing homes
+(``noninstitutionalized_spending_ratio``), and subtracts premium income.
+The four series under ``calibration.gov.hhs.medicare`` are each an aggregate
+from the Medicare Trustees Reports over Table V.B3's total enrollment (people
+with Part A and/or Part B). From 2015 they come from the 2026 report:
 
 - ``premium_income_per_enrollee.part_a``: Table III.B4 premiums from
   voluntary enrollees.
@@ -40,8 +41,10 @@
    standard premium times Part B enrollment plus Table V.E3's aggregate
    income-related premiums reproduces it within 0.5 percent, while the
    standard premium alone falls more than 5 percent short.
-5. Bounds: every series is positive, and net Medicare spending per enrollee
-   stays between 0 and gross spending, in every year from 2013 to 2200.
+5. Bounds: every series is positive, and net Medicare spending per enrollee,
+   (spending - low-income subsidy) x the noninstitutionalized ratio -
+   premiums, stays between 0 and scaled spending, in every year from 2013 to
+   2200.
 6. Extension: from 2036 to 2100 each series grows with Medicare spending
    per enrollee, so each keeps its 2035 share of spending; later years hold
    the 2100 value.
@@ -63,6 +66,7 @@
     "lis": f"{MEDICARE}.part_d_low_income_subsidy_per_enrollee",
 }
 SPENDING = f"{MEDICARE}.per_capita_cost"
+RATIO = f"{MEDICARE}.noninstitutionalized_spending_ratio"
 FIRST_YEAR, LAST_PROJECTED_YEAR, END_YEAR = 2015, 2035, 2100
 YEARS = range(FIRST_YEAR, LAST_PROJECTED_YEAR + 1)
 
@@ -225,9 +229,11 @@ def test_part_b_premium_income_includes_income_related_premiums():
 @given(st.integers(BACKFILL_YEARS[0], END_YEAR + 100))
 @example(BACKFILL_YEARS[0])
 def test_series_are_positive_and_net_spending_is_between_zero_and_gross(year):
-    deductions = sum(_value(series, year) for series in SERIES)
+    ratio = _read(RATIO, f"{year}-01-01")
+    premiums = sum(_value(series, year) for series in SERIES if series != "lis")
+    net = (_spending(year) - _value("lis", year)) * ratio - premiums
     assert all(_value(series, year) > 0 for series in SERIES)
-    assert 0 < _spending(year) - deductions < _spending(year)
+    assert 0 < net < _spending(year) * ratio
 
 
 @pytest.mark.parametrize("series", SERIES)
diff --git a/policyengine_us/tests/core/test_medicare_cost_part_d_premium.py b/policyengine_us/tests/core/test_medicare_cost_part_d_premium.py
index 6c2379bcd05..1619e8eb6c7 100644
--- a/policyengine_us/tests/core/test_medicare_cost_part_d_premium.py
+++ b/policyengine_us/tests/core/test_medicare_cost_part_d_premium.py
@@ -1,10 +1,11 @@
 """The Part D premium that ``medicare_cost`` subtracts.
 
 CMS Medicare spending per enrollee (``calibration.gov.hhs.medicare.
-per_capita_cost``) covers Parts A through D, averaged over every Medicare
-enrollee, gross of the premiums that finance it. ``medicare_cost`` subtracts
-the Part D premium averaged the same way, plus the person's own
-income-related monthly adjustment amount (IRMAA):
+per_capita_cost``, scaled by ``noninstitutionalized_spending_ratio`` to
+enrollees outside nursing homes) covers Parts A through D, with Part D
+averaged over every Medicare enrollee, gross of the premiums that finance it.
+``medicare_cost`` subtracts the Part D premium averaged the same way, plus the
+person's own income-related monthly adjustment amount (IRMAA):
 
     enrollment_share x premiums_per_enrollee + Part D IRMAA
 
@@ -38,7 +39,8 @@
 5. Calendar years: every date in a year reads the January 1 value; between
    the Trustees' five-year enrollment points the share holds the earlier one.
 6. Consumer (Hypothesis, differential): ``medicare_cost`` equals a reference
-   implementation, max(gross - Part A - Part B - share x premium - IRMAA, 0),
+   implementation, max(gross - Part A - Part B - share x premium - IRMAA, 0)
+   with gross = per_capita_cost x ``noninstitutionalized_spending_ratio``,
    for any year and premiums; it lies in [0, ``medicare_gross_cost``], which
    does not change with the Part D premium.
 7. Accounting (Hypothesis): the person's Part D IRMAA lowers
@@ -232,7 +234,10 @@ def _enrollee(year, part_a, part_b, irmaa):
 
 
 def _reference_medicare_cost(year, part_a, part_b, irmaa):
-    gross = _read("calibration.gov.hhs.medicare.per_capita_cost", f"{year}-01-01")
+    date = f"{year}-01-01"
+    gross = _read("calibration.gov.hhs.medicare.per_capita_cost", date) * _read(
+        "calibration.gov.hhs.medicare.noninstitutionalized_spending_ratio", date
+    )
     part_d = _share(year) * _premium(year) + irmaa
     return max(gross - part_a - part_b - part_d, 0)
 
diff --git a/policyengine_us/tests/core/test_medicare_noninstitutionalized_spending_ratio.py b/policyengine_us/tests/core/test_medicare_noninstitutionalized_spending_ratio.py
new file mode 100644
index 00000000000..0b8c5496fc4
--- /dev/null
+++ b/policyengine_us/tests/core/test_medicare_noninstitutionalized_spending_ratio.py
@@ -0,0 +1,157 @@
+"""The ratio that scales Medicare spending per enrollee to enrollees outside
+nursing homes.
+
+``calibration.gov.hhs.medicare.per_capita_cost`` averages Medicare spending
+over every enrollee, including nursing home residents, whom the household
+survey data do not sample. ``noninstitutionalized_spending_ratio`` is
+spending per enrollee who is not a long-stay nursing home resident over
+spending per enrollee, from MedPAC's 2022 fee-for-service Part A and B
+spending ($31,200 for long-stay residents, about $11,300 for others; June
+2025 report, chapter 5, file page 9) and the long-stay share of beneficiaries
+(1.7 percent; October 2024 slides, file page 5):
+
+    ratio = 1 / (1 + share x (long-stay spending / other spending - 1))
+
+These tests read parameters only. Tests elsewhere cover the consumers at the
+stored ratio: the YAML tests of ``medicare_gross_cost``, ``medicare_cost``,
+``cbo_medicare_benefit`` and ``qmb_cost_sharing``, and the reference
+implementations in test_medicare_per_capita_cost.py,
+test_medicare_cost_part_d_premium.py and test_cbo_medicare_benefit_series.py,
+which multiply by this parameter.
+
+Invariants:
+
+1. Transcription: the stored value is the formula applied to MedPAC's
+   published figures, rounded to three decimals.
+2. Bounds and constancy: the ratio is strictly between 0 and 1 and is the
+   same on every date from 2013, the first year of ``per_capita_cost``.
+3. Sensitivity: the alternatives documented in the parameter file bracket
+   the stored value: fee-for-service enrollment shares (62 percent of
+   long-stay residents, 53 percent of others) give a lower ratio, and pricing
+   Medicare Advantage at the CMS-HCC risk score ratio (2.12 / 1.01) gives a
+   higher one.
+4. Definition order: excluding everyone living in a Medicare Current
+   Beneficiary Survey long-term care facility, which includes assisted living
+   and retirement homes, gives a lower ratio in every year of the published
+   2006-2013 tables (community-only over all-beneficiary benefit payments per
+   capita), so the nursing home ratio is the smaller of the two corrections.
+5. Differential: CBO's 2006 figures, from a different method and source,
+   imply a ratio per recipient and per survey reporter within 0.01 of the
+   stored value.
+"""
+
+import pytest
+from hypothesis import given
+from hypothesis import strategies as st
+from policyengine_core.parameters.operations.get_parameter import get_parameter
+
+from policyengine_us.system import system
+
+RATIO = "calibration.gov.hhs.medicare.noninstitutionalized_spending_ratio"
+FIRST_YEAR, END_YEAR = 2013, 2100
+
+# MedPAC, June 2025 Report to the Congress, chapter 5 (file pages 8, 9 and
+# 13), and October 2024 meeting slides (file page 5).
+LONG_STAY_SPENDING, OTHER_SPENDING = 31_200, 11_300
+LONG_STAY_SHARE = 0.017
+LONG_STAY_FFS_SHARE, OTHER_FFS_SHARE = 0.62, 0.53
+LONG_STAY_RISK_SCORE, OTHER_RISK_SCORE = 2.12, 1.01
+
+# MCBS Characteristics and Perceptions of the Medicare Population, each
+# year's edition
+# (https://www.cms.gov/research-statistics-data-and-systems/research/mcbs/
+# downloads/<year>_characteristics_and_perceptions.zip), all beneficiaries:
+# Table 1.1 beneficiaries (thousands) and Table 4.1 benefit payments ($
+# millions), total and community only.
+MCBS = {
+    2006: (43_867, 41_599, 305_066, 267_344),
+    2007: (45_046, 42_867, 307_372, 271_509),
+    2008: (46_100, 43_906, 320_032, 282_887),
+    2009: (47_371, 45_053, 335_081, 289_843),
+    2010: (48_454, 46_270, 365_098, 322_150),
+    2011: (50_186, 47_969, 374_252, 330_907),
+    2012: (51_723, 49_816, 338_395, 299_144),
+    2013: (53_574, 51_568, 352_943, 312_626),
+}
+
+# CBO 2006, in billions of dollars. Working Paper 2018-07: 93 percent of
+# enrollees reported Medicare in the survey and 6 percent of recipients were
+# institutionalized (file pages 45-46); Medicare benefits other than the
+# low-income subsidy after CBO's adjustments, $352.4, and the subsidy, $10.3
+# (file page 51). CBO (2013), The Distribution of Federal Spending and Taxes
+# in 2006: $32 of Medicare spending for people in long-term care institutions
+# (file page 53). 2007 Medicare Trustees Report, Table II.B1: 2006 benefits,
+# $402.0, and Part A premiums, $2.6, which CBO subtracts (file page 52).
+CBO_REPORTING_RATE, CBO_INSTITUTIONALIZED_SHARE = 0.93, 0.06
+CBO_ADJUSTED_BENEFITS, CBO_LOW_INCOME_SUBSIDY = 352.4, 10.3
+CBO_INSTITUTIONAL_SPENDING = 32
+TRUSTEES_BENEFITS, TRUSTEES_PART_A_PREMIUMS = 402.0, 2.6
+
+
+def _ratio(share, relative):
+    return 1 / (1 + share * (relative - 1))
+
+
+def _stored(date):
+    return get_parameter(system.parameters, RATIO)(date)
+
+
+def test_value_is_the_medpac_formula():
+    expected = _ratio(LONG_STAY_SHARE, LONG_STAY_SPENDING / OTHER_SPENDING)
+    assert _stored("2022-01-01") == round(expected, 3) == 0.971
+
+
+@given(st.integers(FIRST_YEAR, END_YEAR + 100), st.integers(1, 12))
+def test_ratio_is_a_constant_share_below_one(year, month):
+    value = _stored(f"{year}-{month:02d}-01")
+    assert 0 < value < 1
+    assert value == _stored("2022-01-01")
+
+
+def test_documented_alternatives_bracket_the_value():
+    relative = LONG_STAY_SPENDING / OTHER_SPENDING
+    ffs_share = (
+        LONG_STAY_SHARE
+        * LONG_STAY_FFS_SHARE
+        / (
+            LONG_STAY_SHARE * LONG_STAY_FFS_SHARE
+            + (1 - LONG_STAY_SHARE) * OTHER_FFS_SHARE
+        )
+    )
+    ffs_ratio = _ratio(ffs_share, relative)
+    # Price Medicare Advantage enrollees at the risk score ratio, with other
+    # beneficiaries' spending the same in both programs.
+    groups = {
+        "long_stay_ffs": (LONG_STAY_SHARE * LONG_STAY_FFS_SHARE, relative),
+        "long_stay_ma": (
+            LONG_STAY_SHARE * (1 - LONG_STAY_FFS_SHARE),
+            LONG_STAY_RISK_SCORE / OTHER_RISK_SCORE,
+        ),
+        "other": (1 - LONG_STAY_SHARE, 1),
+    }
+    average = sum(count * cost for count, cost in groups.values())
+    mixed_ratio = 1 / average
+    assert round(ffs_ratio, 3) == 0.966
+    assert round(mixed_ratio, 3) == 0.975
+    assert ffs_ratio < _stored("2022-01-01") < mixed_ratio
+
+
+@pytest.mark.parametrize("year", MCBS)
+def test_mcbs_facility_definition_gives_a_larger_gap(year):
+    total_people, community_people, total_pay, community_pay = MCBS[year]
+    mcbs_ratio = (community_pay / community_people) / (total_pay / total_people)
+    # The stored ratio starts in 2013, so compare every year to its value.
+    assert 0.9 < mcbs_ratio < _stored("2022-01-01")
+
+
+def test_cbo_2006_figures_imply_a_similar_ratio():
+    benefits = TRUSTEES_BENEFITS - TRUSTEES_PART_A_PREMIUMS - CBO_LOW_INCOME_SUBSIDY
+    assert benefits == pytest.approx(389.1)
+    per_recipient = (1 - CBO_INSTITUTIONAL_SPENDING / benefits) / (
+        1 - CBO_INSTITUTIONALIZED_SHARE
+    )
+    per_reporter = CBO_ADJUSTED_BENEFITS / benefits / CBO_REPORTING_RATE
+    assert round(per_recipient, 3) == 0.976
+    assert round(per_reporter, 3) == 0.974
+    for implied in (per_recipient, per_reporter):
+        assert implied == pytest.approx(_stored("2013-01-01"), abs=0.01)
diff --git a/policyengine_us/tests/core/test_medicare_per_capita_cost.py b/policyengine_us/tests/core/test_medicare_per_capita_cost.py
index 41a82587d2e..c8796f46db3 100644
--- a/policyengine_us/tests/core/test_medicare_per_capita_cost.py
+++ b/policyengine_us/tests/core/test_medicare_per_capita_cost.py
@@ -11,10 +11,13 @@
 at the 2031-2032 rate, because the end of sequestration on August 31, 2033
 lifts 2033 and 2034 growth.
 
-``medicare_gross_cost`` returns the series for each enrolled person,
-``medicare_cost`` subtracts the person's Part A, gross Part B and expected
-Part D premiums (tested in test_medicare_cost_part_d_premium.py), and
-``qmb_cost_sharing`` pays QMB enrollees a share of it each month.
+``medicare_gross_cost`` returns the series times
+``noninstitutionalized_spending_ratio`` (enrollees outside nursing homes,
+tested in test_medicare_noninstitutionalized_spending_ratio.py) for each
+enrolled person, ``medicare_cost`` subtracts the person's Part A, gross Part
+B and expected Part D premiums from that (tested in
+test_medicare_cost_part_d_premium.py), and ``qmb_cost_sharing`` pays QMB
+enrollees a share of it each month.
 
 Invariants:
 
@@ -33,11 +36,11 @@
    Trustees' 2034-2035 per beneficiary growth.
 5. Calendar years: every date within a year reads the January 1 value.
 6. Consumers: for an enrolled person, ``medicare_gross_cost`` equals the
-   series; ``medicare_cost`` equals the series less the Part A premium, the
-   gross Part B premium and the expected Part D premium, floored at zero, so
-   never exceeds ``medicare_gross_cost``; a QMB enrollee's monthly
-   ``qmb_cost_sharing`` is the series over 12 times the QMB rate. A person
-   not enrolled gets zero.
+   series times the noninstitutionalized ratio; ``medicare_cost`` equals that
+   less the Part A premium, the gross Part B premium and the expected Part D
+   premium, floored at zero, so never exceeds ``medicare_gross_cost``; a QMB
+   enrollee's monthly ``qmb_cost_sharing`` is the scaled series over 12
+   times the QMB rate. A person not enrolled gets zero.
 """
 
 import pytest
@@ -49,6 +52,7 @@
 from policyengine_us.system import system
 
 SERIES = "calibration.gov.hhs.medicare.per_capita_cost"
+RATIO = "calibration.gov.hhs.medicare.noninstitutionalized_spending_ratio"
 FIRST_YEAR, LAST_PROJECTED_YEAR, END_YEAR = 2013, 2034, 2100
 YEARS = range(FIRST_YEAR, LAST_PROJECTED_YEAR + 1)
 GROWTH_YEARS = (2031, 2032)
@@ -110,6 +114,10 @@ def _value(year):
     return _series(f"{year}-01-01")
 
 
+def _scaled(year):
+    return _value(year) * get_parameter(system.parameters, RATIO)(f"{year}-01-01")
+
+
 @pytest.mark.parametrize("year", YEARS)
 def test_series_is_table_17_medicare_spending_per_enrollee(year):
     assert _value(year) == MEDICARE_SPENDING_PER_ENROLLEE[year]
@@ -216,10 +224,10 @@ def test_medicare_cost_nets_premiums_from_the_series(
     gross = simulation.calculate("medicare_gross_cost", year)[0]
     net = simulation.calculate("medicare_cost", year)[0]
     # Variables are float32, so compare to single precision.
-    assert gross == pytest.approx(_value(year), rel=1e-6)
+    assert gross == pytest.approx(_scaled(year), rel=1e-6)
     part_d = system.parameters(f"{year}-01-01").calibration.gov.hhs.medicare.part_d
     part_d_premium = part_d.enrollment_share * part_d.premiums_per_enrollee
-    expected = max(_value(year) - part_a_premium - part_b_premium - part_d_premium, 0)
+    expected = max(_scaled(year) - part_a_premium - part_b_premium - part_d_premium, 0)
     assert net == pytest.approx(expected, rel=1e-6, abs=0.01)
     assert net <= gross
 
@@ -248,5 +256,5 @@ def test_qmb_cost_sharing_is_the_qmb_rate_of_monthly_spending(year, month):
     ).gov.hhs.medicare.savings_programs.qmb.cost_sharing_rate
     simulation = _person_simulation(year, {"msp_category": {period: "QMB"}})
     assert simulation.calculate("qmb_cost_sharing", period)[0] == pytest.approx(
-        _value(year) / 12 * rate, rel=1e-6
+        _scaled(year) / 12 * rate, rel=1e-6
     )
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/cbo_medicare_benefit.yaml b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/cbo_medicare_benefit.yaml
index f767fa56302..8de9fa17def 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/cbo_medicare_benefit.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/cbo_medicare_benefit.yaml
@@ -1,7 +1,9 @@
-# cbo_medicare_benefit = Medicare spending per enrollee - premium income per
-# Medicare enrollee (Parts A, B and D) - Part D low-income subsidy per
-# Medicare enrollee, the same for every enrollee.
-# 2025: $17,751 - $82.26 - $2,169.44 - $215.04 - $251.12 = $15,033.14.
+# cbo_medicare_benefit = (Medicare spending per enrollee - Part D low-income
+# subsidy per Medicare enrollee) x the ratio of spending per enrollee outside
+# nursing homes to spending per enrollee (0.971) - premium income per Medicare
+# enrollee (Parts A, B and D), the same for every enrollee.
+# 2025: ($17,751 - $251.12) x 0.971 - $82.26 - $2,169.44 - $215.04
+# = $16,992.38 - $2,466.74 = $14,525.64.
 
 - name: Case 1, enrolled person gets the average net of premiums and the low-income subsidy.
   period: 2025
@@ -11,8 +13,8 @@
     is_medicare_eligible: true
     medicare_enrolled: true
   output:
-    medicare_gross_cost: 17_751
-    cbo_medicare_benefit: 15_033.14
+    medicare_gross_cost: 17_236.22
+    cbo_medicare_benefit: 14_525.64
 
 # CBO assigns the average to every enrollee, so the person with 20 quarters
 # of coverage (a $6,216 Part A premium in 2025) and the person paying the
@@ -76,7 +78,7 @@
             not_enrolled,
           ]
   output:
-    cbo_medicare_benefit: [15_033.14, 15_033.14, 15_033.14, 15_033.14, 0]
+    cbo_medicare_benefit: [14_525.64, 14_525.64, 14_525.64, 14_525.64, 0]
 
 - name: Case 3, first year with enrollment from the 2026 Trustees Report.
   period: 2015
@@ -86,8 +88,8 @@
     is_medicare_eligible: true
     medicare_enrolled: true
   output:
-    # $11,929 - $57.57 - $1,214.54 - $224.86 - $460.52.
-    cbo_medicare_benefit: 9_971.51
+    # ($11,929 - $460.52) x 0.971 - $57.57 - $1,214.54 - $224.86.
+    cbo_medicare_benefit: 9_638.92
 
 - name: Case 4, last Trustees projection year.
   period: 2035
@@ -97,9 +99,9 @@
     is_medicare_eligible: true
     medicare_enrolled: true
   output:
-    # $31,764.35 (the 2034 CMS value grown at the 2031-2032 rate) - $156.27
-    # - $4,652 - $809.85 - $431.59.
-    cbo_medicare_benefit: 25_714.64
+    # ($31,764.35, the 2034 CMS value grown at the 2031-2032 rate, - $431.59)
+    # x 0.971 - $156.27 - $4,652 - $809.85.
+    cbo_medicare_benefit: 24_805.99
 
 - name: Case 5, not enrolled.
   period: 2025
@@ -118,8 +120,8 @@
     is_medicare_eligible: true
     medicare_enrolled: true
   output:
-    # $11,483 - $64.76 - $1,201.53 - $188.56 - $441.87.
-    cbo_medicare_benefit: 9_586.28
+    # ($11,483 - $441.87) x 0.971 - $64.76 - $1,201.53 - $188.56.
+    cbo_medicare_benefit: 9_266.09
 
 - name: Case 7, second year of CMS spending per enrollee.
   period: 2014
@@ -129,5 +131,5 @@
     is_medicare_eligible: true
     medicare_enrolled: true
   output:
-    # $11,683 - $60.98 - $1,213.05 - $210.66 - $449.04.
-    cbo_medicare_benefit: 9_749.27
+    # ($11,683 - $449.04) x 0.971 - $60.98 - $1,213.05 - $210.66.
+    cbo_medicare_benefit: 9_423.49
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_cost.yaml b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_cost.yaml
index 52d793f2cd9..8db57b57481 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_cost.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_cost.yaml
@@ -1,7 +1,10 @@
-# The Part D premium is the average per Medicare enrollee, the Part D
-# enrollment share times Part D premiums per Part D enrollee (2025: 0.8191 x
-# $220.25 = $180.41), plus the person's own Part D IRMAA. Sources: 2026
-# Medicare Trustees Report, Tables III.D3, V.B3 and V.E4.
+# Spending is CMS Medicare spending per enrollee times the ratio of spending
+# per enrollee outside nursing homes to spending per enrollee (0.971); 2025:
+# $17,751 x 0.971 = $17,236.22. The Part D premium is the average per
+# Medicare enrollee, the Part D enrollment share times Part D premiums per
+# Part D enrollee (2025: 0.8191 x $220.25 = $180.41), plus the person's own
+# Part D IRMAA. Sources: 2026 Medicare Trustees Report, Tables III.D3, V.B3
+# and V.E4.
 
 - name: unit test 1 - enrolled, premium-free Part A
   period: 2025
@@ -15,8 +18,8 @@
     tax_exempt_interest_income:
       2023: 0
   output:
-    # $17,751 spending - $2,220 Part B premium - $180.41 Part D (2025)
-    medicare_cost: 15_350.59
+    # $17,236.22 spending - $2,220 Part B premium - $180.41 Part D (2025)
+    medicare_cost: 14_835.81
 
 - name: unit test 2 - enrolled, pays full Part A premium
   period: 2025
@@ -30,8 +33,8 @@
     tax_exempt_interest_income:
       2023: 0
   output:
-    # $17,751 - $6,216 Part A - $2,220 Part B - $180.41 Part D (2025)
-    medicare_cost: 9_134.59
+    # $17,236.22 - $6,216 Part A - $2,220 Part B - $180.41 Part D (2025)
+    medicare_cost: 8_619.81
 
 - name: unit test 3 - enrolled with IRMAA
   period: 2025
@@ -46,9 +49,9 @@
       2023: 0
     filing_status: SINGLE
   output:
-    # $17,751 - $7,546.80 Part B with IRMAA - $180.41 Part D - $85.80 x 12
-    # = $1,029.60 Part D IRMAA (2025)
-    medicare_cost: 8_994.19
+    # $17,236.22 - $7,546.80 Part B with IRMAA - $180.41 Part D - $85.80 x
+    # 12 = $1,029.60 Part D IRMAA (2025)
+    medicare_cost: 8_479.41
 
 - name: unit test 4 - eligible but not enrolled
   period: 2025
@@ -71,8 +74,9 @@
     tax_exempt_interest_income:
       2019: 0
   output:
-    # $14,293 - $1,782 Part B (2021: $148.50*12) - 0.7811 x $306.15 Part D
-    medicare_cost: 12_271.87
+    # $14,293 x 0.971 = $13,878.50 - $1,782 Part B (2021: $148.50*12)
+    # - 0.7811 x $306.15 Part D
+    medicare_cost: 11_857.37
 
 - name: unit test 6 - direct Part B premium input
   period: 2025
@@ -83,8 +87,8 @@
     medicare_quarters_of_coverage: 40
     gross_medicare_part_b_premium: 3_000
   output:
-    # $17,751 spending - $3,000 Part B premium - $180.41 Part D
-    medicare_cost: 14_570.59
+    # $17,236.22 spending - $3,000 Part B premium - $180.41 Part D
+    medicare_cost: 14_055.81
 
 - name: unit test 7 - Part D IRMAA in the 50 percent tier
   period: 2025
@@ -101,8 +105,8 @@
     gross_medicare_part_b_premium: 2_220
   output:
     income_adjusted_part_d_premium_surcharge: 423.6
-    # $17,751 - $2,220 Part B - $180.41 Part D - $423.60 Part D IRMAA
-    medicare_cost: 14_926.99
+    # $17,236.22 - $2,220 Part B - $180.41 Part D - $423.60 Part D IRMAA
+    medicare_cost: 14_412.21
 
 - name: unit test 8 - projected year
   period: 2027
@@ -114,8 +118,9 @@
     gross_medicare_part_b_premium: 2_500
     income_adjusted_part_d_premium_surcharge: 0
   output:
-    # $20,096 - $2,500 Part B - 0.8255 x $373.53 = $308.35 Part D (2027)
-    medicare_cost: 17_287.65
+    # $20,096 x 0.971 = $19,513.22 - $2,500 Part B - 0.8255 x $373.53 =
+    # $308.35 Part D (2027)
+    medicare_cost: 16_704.87
 
 - name: unit test 9 - Inflation Reduction Act premium reset year, with IRMAA
   period: 2030
@@ -127,9 +132,9 @@
     gross_medicare_part_b_premium: 3_000
     income_adjusted_part_d_premium_surcharge: 1_000
   output:
-    # $23,789 - $3,000 Part B - 0.8382 x $637.06 = $533.98 Part D - $1,000
-    # Part D IRMAA (2030)
-    medicare_cost: 19_255.02
+    # $23,789 x 0.971 = $23,099.12 - $3,000 Part B - 0.8382 x $637.06 =
+    # $533.98 Part D - $1,000 Part D IRMAA (2030)
+    medicare_cost: 18_565.14
 
 - name: unit test 10 - premiums above spending floor the value at zero
   period: 2025
@@ -143,6 +148,7 @@
 
 - name: unit test 11 - gross cost does not subtract the Part D premium
   period: 2025
+  absolute_error_margin: 0.01
   input:
     age: 65
     is_medicare_eligible: true
@@ -150,7 +156,7 @@
     gross_medicare_part_b_premium: 2_220
     income_adjusted_part_d_premium_surcharge: 1_029.6
   output:
-    medicare_gross_cost: 17_751
+    medicare_gross_cost: 17_236.22
 
 # A Medicare enrollee whose drug coverage is not Part D owes no Part D IRMAA
 # (income_adjusted_part_d_premium_surcharge is defined for
@@ -171,5 +177,5 @@
     filing_status: SINGLE
   output:
     income_adjusted_part_d_premium_surcharge: 0
-    # $17,751 - $7,546.80 Part B with IRMAA - $180.41 Part D (2025)
-    medicare_cost: 10_023.79
+    # $17,236.22 - $7,546.80 Part B with IRMAA - $180.41 Part D (2025)
+    medicare_cost: 9_509.01
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_gross_cost.yaml b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_gross_cost.yaml
index 15eb8725e7d..e59831f759d 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_gross_cost.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/costs/medicare_gross_cost.yaml
@@ -1,5 +1,10 @@
+# medicare_gross_cost = CMS Medicare spending per enrollee x the ratio of
+# spending per enrollee outside nursing homes to spending per enrollee (0.971).
+# 2025: $17,751 x 0.971 = $17,236.22.
+
 - name: unit test 1 - enrolled, premium-free Part A gets full gross Medicare value
   period: 2025
+  absolute_error_margin: 0.01
   input:
     age: 65
     is_medicare_eligible: true
@@ -10,11 +15,11 @@
     tax_exempt_interest_income:
       2023: 0
   output:
-    # CMS Medicare spending per enrollee, 2025.
-    medicare_gross_cost: 17_751
+    medicare_gross_cost: 17_236.22
 
 - name: unit test 2 - premiums do not reduce gross Medicare value
   period: 2025
+  absolute_error_margin: 0.01
   input:
     age: 65
     is_medicare_eligible: true
@@ -26,5 +31,13 @@
       2023: 0
     filing_status: SINGLE
   output:
-    # CMS Medicare spending per enrollee, 2025.
-    medicare_gross_cost: 17_751
+    medicare_gross_cost: 17_236.22
+
+- name: unit test 3 - not enrolled
+  period: 2025
+  input:
+    age: 65
+    is_medicare_eligible: true
+    medicare_enrolled: false
+  output:
+    medicare_gross_cost: 0
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_cost.yaml b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_cost.yaml
index 55be058ba49..9cb12d59fa3 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_cost.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_cost.yaml
@@ -11,8 +11,8 @@
     base_part_b_premium: 2_434.8
   output:
     # Part B premium: $202.90 * 12 = $2,434.80.
-    # QMB cost sharing: $18,983 * 20% = $3,796.60.
-    msp_cost: 6_231.4
+    # QMB cost sharing: $18,983 * 0.971 * 20% = $3,686.50.
+    msp_cost: 6_121.3
 
 - name: Case 2, SLMB MSP-only beneficiary receives Part B premium value.
   period: 2026
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_federal_and_state_cost.yaml b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_federal_and_state_cost.yaml
index 0c526fe9c29..610ba12f6d1 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_federal_and_state_cost.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/msp_federal_and_state_cost.yaml
@@ -10,9 +10,9 @@
     base_part_a_premium: 0
     base_part_b_premium: 2_434.8
   output:
-    # CA regular FMAP is 50%; total MSP cost is $6,231.40.
-    msp_federal_cost: 3_115.7
-    msp_state_cost: 3_115.7
+    # CA regular FMAP is 50%; total MSP cost is $6,121.30.
+    msp_federal_cost: 3_060.65
+    msp_state_cost: 3_060.65
 
 - name: Case 2, QI cost is federally financed within allocation.
   period: 2026
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/qmb_cost_sharing.yaml b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/qmb_cost_sharing.yaml
index 1fa5134a84f..695e184b496 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/qmb_cost_sharing.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/savings_programs/qmb_cost_sharing.yaml
@@ -4,8 +4,9 @@
   input:
     msp_category: QMB
   output:
-    # $18,983 annual Medicare spending per enrollee (2026) / 12 * 20%.
-    qmb_cost_sharing: 316.38
+    # $18,983 annual Medicare spending per enrollee (2026) x 0.971 (enrollees
+    # outside nursing homes) / 12 * 20%.
+    qmb_cost_sharing: 307.21
 
 - name: Case 2, non-QMB MSP categories do not receive QMB cost sharing.
   period: 2026-01
diff --git a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/test_part_b_msp_offset.py b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/test_part_b_msp_offset.py
index b15943e5203..5de6f86d4a3 100644
--- a/policyengine_us/tests/policy/baseline/gov/hhs/medicare/test_part_b_msp_offset.py
+++ b/policyengine_us/tests/policy/baseline/gov/hhs/medicare/test_part_b_msp_offset.py
@@ -87,9 +87,10 @@ def test_medicare_cost_uses_gross_part_b_before_msp_offset():
     )
 
     assert sim.calculate("medicare_part_b_premium", PERIOD)[0] == pytest.approx(0)
-    # $17,751 CMS Medicare spending per enrollee (2025) - $2,220 gross Part B
-    # - 0.8191 x $220.25 expected Part D premium.
-    assert sim.calculate("medicare_cost", PERIOD)[0] == pytest.approx(15_350.59)
+    # $17,751 CMS Medicare spending per enrollee (2025) x 0.971 for enrollees
+    # outside nursing homes - $2,220 gross Part B - 0.8191 x $220.25 expected
+    # Part D premium.
+    assert sim.calculate("medicare_cost", PERIOD)[0] == pytest.approx(14_835.81)
 
 
 def test_medicare_part_b_premium_is_zero_when_not_enrolled():
@@ -345,9 +346,10 @@ def test_gross_medicare_part_b_premium_if_enrolled_preserves_irmaa():
     assert sim.calculate("gross_medicare_part_b_premium_if_enrolled", PERIOD)[
         0
     ] == pytest.approx(4_440)
-    # $17,751 CMS Medicare spending per enrollee (2025) - $4,440 gross Part B
-    # - 0.8191 x $220.25 expected Part D premium.
-    assert sim.calculate("medicare_cost", PERIOD)[0] == pytest.approx(13_130.59)
+    # $17,751 CMS Medicare spending per enrollee (2025) x 0.971 for enrollees
+    # outside nursing homes - $4,440 gross Part B - 0.8191 x $220.25 expected
+    # Part D premium.
+    assert sim.calculate("medicare_cost", PERIOD)[0] == pytest.approx(12_615.81)
 
 
 def test_medicare_irmaa_magi_two_years_prior_falls_back_to_lagged_income():
diff --git a/policyengine_us/tests/policy/baseline/household/income/household/cbo_household_income.yaml b/policyengine_us/tests/policy/baseline/household/income/household/cbo_household_income.yaml
index 642eb31834d..3a0bf258932 100644
--- a/policyengine_us/tests/policy/baseline/household/income/household/cbo_household_income.yaml
+++ b/policyengine_us/tests/policy/baseline/household/income/household/cbo_household_income.yaml
@@ -34,16 +34,17 @@
     workers_compensation: 1_000
   output:
     cbo_household_market_income: 49_102
-    # CMS Medicare spending per enrollee, 2025.
-    medicare_gross_cost: 17_751
-    # $17,751 less 2025 premium income per Medicare enrollee ($82.26 Part A,
-    # $2,169.44 Part B, $215.04 Part D) and the $251.12 Part D low-income
-    # subsidy per Medicare enrollee.
-    cbo_medicare_benefit: 15_033.14
-    # $12,000 + $15,033.14 + $2,000 + $1,000.
-    cbo_household_social_insurance_benefits: 30_033.14
-    cbo_household_income_before_transfers_and_taxes: 79_135.14
-    cbo_household_income: 79_135.14
+    # CMS Medicare spending per enrollee, 2025, x 0.971 for enrollees outside
+    # nursing homes: $17,751 x 0.971.
+    medicare_gross_cost: 17_236.22
+    # ($17,751 less the $251.12 Part D low-income subsidy per Medicare
+    # enrollee) x 0.971, less 2025 premium income per Medicare enrollee
+    # ($82.26 Part A, $2,169.44 Part B, $215.04 Part D).
+    cbo_medicare_benefit: 14_525.64
+    # $12,000 + $14,525.64 + $2,000 + $1,000.
+    cbo_household_social_insurance_benefits: 29_525.64
+    cbo_household_income_before_transfers_and_taxes: 78_627.64
+    cbo_household_income: 78_627.64
 
 - name: CBO income counts a Medicare enrollee net of premiums in 2014
   period: 2014
@@ -53,12 +54,12 @@
     medicare_enrolled: true
     employment_income: 10_000
   output:
-    # $11,683 - $60.98 - $1,213.05 - $210.66 - $449.04.
-    cbo_medicare_benefit: 9_749.27
+    # ($11,683 - $449.04) x 0.971 - $60.98 - $1,213.05 - $210.66.
+    cbo_medicare_benefit: 9_423.49
     # $10,891, the same household's CBO income without an enrollee, plus
-    # $9,749.27. Counting gross Medicare spending per enrollee ($11,683)
+    # $9,423.49. Counting gross Medicare spending per enrollee ($11,683)
     # instead gives $10,891 + $11,683 = $22,574.
-    cbo_household_income: 20_640.27
+    cbo_household_income: 20_314.49
 
 - name: CBO means-tested transfers include only the listed programs
   period: 2026
diff --git a/policyengine_us/variables/gov/hhs/medicare/costs/cbo_medicare_benefit.py b/policyengine_us/variables/gov/hhs/medicare/costs/cbo_medicare_benefit.py
index a2b0c748dd2..7d34386efa4 100644
--- a/policyengine_us/variables/gov/hhs/medicare/costs/cbo_medicare_benefit.py
+++ b/policyengine_us/variables/gov/hhs/medicare/costs/cbo_medicare_benefit.py
@@ -11,11 +11,13 @@ class cbo_medicare_benefit(Variable):
         "providing Medicare Parts A, B and D, net of premium income "
         "(premiums paid by or on behalf of enrollees, as the Medicare "
         "Trustees count it; this includes premiums state Medicaid programs "
-        "pay, which PolicyEngine counts in Medicaid). CBO assigns the same "
-        "average to every enrollee and counts the Part D low-income subsidy "
-        "separately as a means-tested transfer, so this subtracts "
-        "per-enrollee averages of premium income and of the low-income "
-        "subsidy from Medicare spending per enrollee, rather than the "
+        "pay, which PolicyEngine counts in Medicaid), excluding costs for "
+        "institutionalized enrollees. CBO assigns the same average to every "
+        "enrollee and counts the Part D low-income subsidy separately as a "
+        "means-tested transfer, so this subtracts the low-income subsidy per "
+        "enrollee from Medicare spending per enrollee, scales the result to "
+        "enrollees who do not live in nursing homes, and subtracts premium "
+        "income per enrollee, rather than the "
         "person's own premiums."
     )
     unit = USD
@@ -32,10 +34,12 @@ class cbo_medicare_benefit(Variable):
     def formula(person, period, parameters):
         p = parameters(period).calibration.gov.hhs.medicare
         premiums = p.premium_income_per_enrollee
+        # Premium income stays an average over all enrollees: MedPAC splits
+        # program spending, not premiums, by nursing home residence.
         total_premiums = premiums.part_a + premiums.part_b + premiums.part_d
-        net = (
-            p.per_capita_cost
-            - total_premiums
-            - p.part_d_low_income_subsidy_per_enrollee
-        )
-        return max_(net, 0)
+        # CBO removes institutionalized enrollees' share of Medicare benefits
+        # other than the low-income subsidy, which it counts separately.
+        noninstitutionalized_spending = (
+            p.per_capita_cost - p.part_d_low_income_subsidy_per_enrollee
+        ) * p.noninstitutionalized_spending_ratio
+        return max_(noninstitutionalized_spending - total_premiums, 0)
diff --git a/policyengine_us/variables/gov/hhs/medicare/costs/medicare_cost.py b/policyengine_us/variables/gov/hhs/medicare/costs/medicare_cost.py
index ed734b03c9a..27ecc17ffda 100644
--- a/policyengine_us/variables/gov/hhs/medicare/costs/medicare_cost.py
+++ b/policyengine_us/variables/gov/hhs/medicare/costs/medicare_cost.py
@@ -6,12 +6,12 @@ class medicare_cost(Variable):
     entity = Person
     label = "Medicare cost"
     documentation = (
-        "Annual value of Medicare benefits received. Calculated as total "
-        "Medicare spending on behalf of the beneficiary, which covers Parts A "
-        "through D, minus the premiums that finance it: the Part A premium, "
-        "the gross Part B premium, the average Part D premium per Medicare "
-        "enrollee, and the person's own Part D income-related monthly "
-        "adjustment amount. This represents the net benefit value of "
+        "Annual value of Medicare benefits received: Medicare spending per "
+        "enrollee who does not live in a nursing home, which covers Parts A "
+        "through D, minus the premiums that finance it, namely the Part A "
+        "premium, the gross Part B premium, the average Part D premium per "
+        "Medicare enrollee, and the person's own Part D income-related "
+        "monthly adjustment amount. This represents the net benefit value of "
         "Medicare coverage."
     )
     unit = USD
@@ -24,8 +24,9 @@ class medicare_cost(Variable):
 
     def formula(person, period, parameters):
         p = parameters(period).calibration.gov.hhs.medicare
-        # Total Medicare spending on behalf of beneficiary
-        per_capita_spending = p.per_capita_cost
+        # Medicare spending on behalf of an enrollee who does not live in a
+        # nursing home, the population the household survey data cover.
+        per_capita_spending = p.per_capita_cost * p.noninstitutionalized_spending_ratio
 
         # Premium offsets to Medicare program cost. Use the enrollment-gated
         # gross Part B premium before MSP offsets so MSP support does not
diff --git a/policyengine_us/variables/gov/hhs/medicare/costs/medicare_gross_cost.py b/policyengine_us/variables/gov/hhs/medicare/costs/medicare_gross_cost.py
index 1baeeaf188a..ee250bebe94 100644
--- a/policyengine_us/variables/gov/hhs/medicare/costs/medicare_gross_cost.py
+++ b/policyengine_us/variables/gov/hhs/medicare/costs/medicare_gross_cost.py
@@ -9,10 +9,12 @@ class medicare_gross_cost(Variable):
         "Annual Medicare spending on behalf of the beneficiary before "
         "subtracting beneficiary premiums: CMS Medicare spending per "
         "enrollee, which covers Parts A through D, including the Part D "
-        "low-income subsidy. CBO's standard household income counts "
-        "Medicare net of premiums instead (cbo_medicare_benefit); CBO adds "
-        "the premiums back only in an expanded sensitivity measure, which "
-        "it calls gross Medicare spending."
+        "low-income subsidy, scaled to enrollees who do not live in nursing "
+        "homes, the population the household survey data cover. CBO's "
+        "standard household income counts Medicare net of premiums instead "
+        "(cbo_medicare_benefit); CBO adds the premiums back only in an "
+        "expanded sensitivity measure, which it calls gross Medicare "
+        "spending."
     )
     unit = USD
     definition_period = YEAR
@@ -23,4 +25,5 @@ class medicare_gross_cost(Variable):
     defined_for = "medicare_enrolled"
 
     def formula(person, period, parameters):
-        return parameters(period).calibration.gov.hhs.medicare.per_capita_cost
+        p = parameters(period).calibration.gov.hhs.medicare
+        return p.per_capita_cost * p.noninstitutionalized_spending_ratio
diff --git a/policyengine_us/variables/gov/hhs/medicare/savings_programs/qmb_cost_sharing.py b/policyengine_us/variables/gov/hhs/medicare/savings_programs/qmb_cost_sharing.py
index d8e70729ad9..2016834a1df 100644
--- a/policyengine_us/variables/gov/hhs/medicare/savings_programs/qmb_cost_sharing.py
+++ b/policyengine_us/variables/gov/hhs/medicare/savings_programs/qmb_cost_sharing.py
@@ -18,14 +18,17 @@ class qmb_cost_sharing(Variable):
         "First-pass monthly value of QMB coverage for Medicare deductibles, "
         "coinsurance, and copayments. The model lacks beneficiary-level "
         "Medicare claims, so this approximates cost sharing as a parameterized "
-        "share of average Medicare per-capita spending."
+        "share of average Medicare spending per enrollee who does not live "
+        "in a nursing home."
     )
 
     def formula(person, period, parameters):
         category = person("msp_category", period)
         p = parameters(period).gov.hhs.medicare.savings_programs
+        medicare = parameters(period).calibration.gov.hhs.medicare
         monthly_medicare_cost = (
-            parameters(period).calibration.gov.hhs.medicare.per_capita_cost
+            medicare.per_capita_cost
+            * medicare.noninstitutionalized_spending_ratio
             / MONTHS_IN_YEAR
         )
         return (