The impact of ageing on health expenditure has recently attracted from policy makers
and academics. Majority of studies, however, focus on developed countries, where health
care systems are well developed. In China, where old age dependency ratio has grown
faster than in most countries and the health care system has moved away from a public
to a largely self-financed system, the issue of whether ageing induces a sharp increase in
health expenditure and if elderly population can afford such an expenditure is of a greater
concern. This paper addresses these issues using a household survey data. By endogenise
health condition of individuals, we found that age is one of the most important contributing
factors to the increase in health expenditure for individuals. On average, an individual in
his/her 60s spends 50 to 100 per cent more out-of-pocket health expenditure than a 40 years
old individual, whereas those who were in their 80s spend 100 to 170 per cent more than a
40 years old. Our findings indicate that the impact of age on health expenditure is by no
means "read herring". Further more, we find that out-of-pocket health expenditure accounts
for a large proportion of elderly’s income. For a women in her 60th the out-of-pocket health
expenditure is around 20 per cent of her total income. These findings raise concerns about
the well being of the elderly under the current health system in China.