In order to study the effect of muscle exercise on the medical expenditure of the elderly, a three-year exercise program focusing on muscle activity was performed by an intervention group. Individual yearly medical expenditures were collected by 20 participants of the exercise group aver aging 65.2 years of age and 23 control subjects averaging 68.4 years of age with National Health Insurance coverage. Yearly medical expenditures for the exercise group were significantly lower than those of the control group at one and two years after entry. The expenditures increased by 62.6% from 1997 to 1999 in the control group, whereas they increased by only 16.8% for the exer cise group. The results suggest the possibility of the effectiveness of muscle exercise on the reduction in medical expenditure among the elderly.