Contemporary estimates of the association between functional impairment and health costs among United States (US) older adults who documented having pain are unavailable. We used a retrospective database design and developed unadjusted and adjusted linear regression models to assess total, office, outpatient, emergency department, inpatient, and prescribed drug costs between older US adults with and without functional impairment. We included US adults aged ≥ 50 in the 2020 Medical Expenditure Panel Survey dataset who documented having pain in the past month. We also included only those who had positive health costs. Among the 40,092,210 US adults aged ≥ 50 who documented having pain in the past month, we found 37% had functional impairment. In adjusted linear regression models, we found adults with functional impairment (versus adults without functional impairment) had 57.2% higher total health costs and 54.1% higher prescribed drug costs. We did not observe any statistical differences between groups for office, outpatient, emergency department, or inpatient costs. In conclusion, the higher total and prescribed drug costs we found among US older adults with pain and a functional impairment draws attention to the financial burden of functional impairment among these individuals, which needs to be addressed.