<p>Catastrophic health expenditure (CHE) poses a significant financial burden, often linked to deteriorating mental health. This study explored the bidirectional relationship between depressive symptoms and CHE, with intellectual activity as a mediating factor, using panel data from China health and retirement longitudinal study (CHARLS). CHE was defined as 70% of household income in this study, tailored to China’s socioeconomic context, while depressive symptoms were assessed using 10-item center for epidemiologic studies depression scale, and intellectual activity by engagement frequency. After adjusting for confounding factors, the R language lavaan package is used to construct a cross-lagged mediation model. Stratified analyses by education level were conducted, and a sensitivity analysis was performed using the WHO’s CHE definition. The model revealed that intellectual activity played a negative mediating role in the two-way link between depressive symptoms and CHE. The more pronounced the depressive symptoms, the less engaged in intellectual activity, and this in turn worsened CHE. Conversely, CHE significantly decreased the frequency of intellectual engagement, indirectly increasing the risk of depression. This mediating effect remained significant in lower educational attainment group. However, in the higher education group, only the first pathway was significant, whereas the reverse pathway was not. Sensitivity analysis results were consistent with the main analysis, confirming the robustness of the conclusion. These results underscore the interplay between mental health and financial strain, emphasizing the role of intellectual activity in mitigating this relationship, particularly among less-educated populations. The findings offer insights for targeted interventions and policy considerations in healthcare systems.</p>