BACKGROUND: Better understanding the impact of changes in physical activity behavior on short-term health care charges may inform resource allocation decisions to increase population levels of physical activity. This study examines the prospective relationship of changes in physical activity status on short-term changes in health care charges for older adults. METHODS: A prospective cohort study was done on a stratified random sample of 2,393 adults aged 50 and older enrolled in a Minnesota health plan, predicting changes in resource use between two periods (September 1994 to August 1995 and September 1996 to August 1997) based on billed health care charges. RESULTS: After adjustment for age, gender, comorbidity, smoking status, and body mass index, all physical activity states had declining health care charges, relative to those who were consistently inactive. Subjects who increased their physical activity from 0-1 to 3+ days/week had significant declines in their mean annualized total charges (-2,202 dollars, P < 0.01) relative to those who remained inactive. CONCLUSIONS: Increased physical activity among older adults is associated with lower health care charges within 2 years, relative to charges for those who were persistently inactive. These cost savings may justify investments in effective interventions to increase physical activity in older adults.