Objective To forecast the trends of total health expenditure based on the method of System Dynamics and put forward relative countermeasures. Methods Incorporating the population, elderly, GDP, government health expenditures, drug costs and the number of health workers per thousand population into System Dynamics model for total health expenditure. Results Simulation results highly corresponded to historical data (2002-2014) and the official forecast (2015-2020). The model has good stability and reliability. The Simulation results showed that steadily increasing total health expenditure would reach 7457.12 billion yuan in 2025. Conclusions The System Dynamics approach has some superior characteristics to other projection methods in terms of stability and reliability. In order to control the irrational growth of total health expenditure, governmental investment in prevention should be increased to reduce the incidence of chronic diseases, the basic drug system might be improved and the income-oriented performance appraisal should be changed to realize the labor value of medical staff.