The design of pension and health care policies for the elderly requires that we understand the expenditure decisions of the old. Two fundamental characteristics of the elderly are that their health worsens with age and that it does so at different rate for people in different socio-economic groups (Pijoan-Mas and Rıos-Rull (2015)). The question that we plan to address is how do age and health shape preferences and consumption decisions. Surprisingly, very little work exploring effects of health on consumption Specifically, we aim to estimate the effect of health on the marginal utility of consumption. For this we use a model where the evolution of health is itself endogenous. However, we only need to use the consumption Euler equation to estimate structural parameters. This feature greatly reduces the complications of the process and allows us to be agnostic about how is the actual technology that improves health. We exploit plan to exploit differences in consumption growth by age, education, wealth, and health groups that provide enough variation to allow for identification. We use estimates of health transitions by age, education, and wealth that we can interpret as the outcome of optimal behavior and that provide the variation in the data necessary to produce tight estimates.