The hypothesis that one must include life-style changes in order to accurately capture the true relationship between medical expenditures and health status is explored, using data from 22 countries over a 20-year period. A simultaneous model is estimated using a variety of indicators for life style as well as health status. Changes in life style, aging of the population and changes in occupational risk are modeled as influences on medical expenditures: medical expenditures and changes in life style are modeled as having direct influences on health status. The results are consistent with the existence of a positive link between medical expenditures and health status.