Aging and declining health are intrinsically related and are resulting in increasing healthcare spending in many countries. Control of healthcare spending and patient usage behavior are linked. This study examines the healthcare usage behavior of chronically ill elderly patients in Taiwan following an increase in co-payments. The differences in usage behavior are interpreted by comparing the frequency of hospital visits and the types of hospitals chosen by patients before and after the implementation of the new co-payment policy. Claim data of the Taipei branch of the National Health Insurance Bureau (NHIB) is used as a basis for this analysis. Analysis results indicate that choice of hospital type by the elderly is affected by an increase in co-payment, but that difference of the hospital type choice before and after the co-payment increase is too small to be practically significant. However, the frequency of visits decreased significantly after the implementation of the new co-payment policy. Medical care costs per visit for individual patients and for the National Health Insurance system both increased significantly. Visit frequency and hospital type choice, as well as diagnosis and treatment cost and co-payment, all show significant differences among different age groups of the elderly. The effects of co-payment increases are also discussed from the viewpoint of patients and of governmental policy.