Falls among the elderly cost the government £981 million a year, researchers estimate.
Hospital admissions after falls cost the NHS over £580m
Almost 60% of the cost is borne by the NHS, with the remainder spent on long term care.
It was found around 650,000 people over 60 were taken to A&E after falling, and over 204,000 were admitted to hospital.
The research, published in the Journal of Epidemiology and Community Health, said action was needed to prevent falls to protect patients and save NHS funds.
Analysts from the Health Economics Consortium at the University of York examined national databases to evaluate how many people over 60 had experienced a severe fall in 1999.
They looked at the number of A&E visits and hospital admissions in patients aged 60 to 64, 65 to 69, 70 to 74 and 75 and over.
It was found there were almost three times the number of A&E attendances among the over-75s compared to those in the other age groups.
The over-75s were also found to be eleven times more likely to be hospitalised after a fall compared to those aged 60 to 64.
Most falls in all age groups occurred when a person was walking on a level surface.
Calculating the cost of falls, the researchers estimated they cost falls £300,000 per 10,000 of the population aged 60 to 64 , rising to £1.5m per 10,000 aged 75 and over.
They say the total £981m cost is the equivalent of almost 20% of the annual NHS drugs budget.
The research did not look at costs borne by individuals and their families.
Writing in the journal, the researchers led by Dr Paul Scuffham, say preventive measures must be introduced to protect the elderly and to reduce the financial toll on the NHS.
But they add more needs to be done to find out what factors influence the number and severity of falls among older people.
He said falls could be prevented by measures such as encouraging the elderly to take weight-bearing exercise.
Dr Scuffham told BBC News Online: "It's a huge cost. Whether this huge resource which is spent treating people could be better spent on preventing accidental falls is the question that's the next step needed in research."
Gordon Lishman, director general of Age Concern England, said the findings were "extremely worrying".
He added: "The risk of falls increases as we get older and can be a particular problem for people over 75.
"Even minor falls can cause older people to lose their confidence to get on with everyday life, often becoming trapped at home."
He said immediate action was needed.
"Ensuring older people are not discharged too early from hospital and get the care and support they need at home are crucial steps that could reduce the risk."
'Costs can be huge'
A Department of Health spokesperson said: "We want to reduce the number of older people suffering serious injury from falls and to ensure effective treatment and rehabilitation for those who have fallen.
"This is why, over the past two years, we've encouraged the NHS, local councils, voluntary and independent sector partners to work together to provide improved services for older people. We are monitoring progress."
She added: "As the research mentions, forthcoming guidelines for the NHS should speed up rehabilitation services for older people."
Paul Burstow MP, Liberal Democrat spokesman on Older People, said: "The personal cost of a fall can be huge.
"It causes a loss of mobility, leading to social isolation and depression. It can cause hypothermia, infection, and increased dependency and disability leading to some form of long-term care."
He added: "Hip fractures alone cost the NHS an estimated £1billion a year. Yet despite the National Service Framework standard on falls, the Department of Health has failed to appreciate the full cost to the taxpayer and to the older person."