Objective: Based on overcoming the adverse effect of endogenous problem of causality; to study the effect of health insurance for the health of the elderly. Methods: To apply limited information maximum likelihood method and introduce instrumental variables for two-phase analysis. Results: The more to types of medical insurance participated, the easier the risk of chronic diseases could be reduced, but unfavorable to improve self-reported health. Conclusion: The government should develop social insurance under New Rural Cooperative Medical System, to improve the abilities of the elderly in participating in medical insurance.