With the rapid growth of the aging population and the development of pension service industry, positioning service has been played a very important role in healthcare of the elderly. Although many indoor localization algorithms have been developed, there have problems such as low localization precision, high computing complexity and larger memory overhead. The purpose of this work is to construct the system of healthcare based on WSN by using the low power consumption ZigBee communication technology, and present a novel indoor localization algorithm which is called the dictionary database comparison method, after that the algorithm is optimized by using weight factors. Compare of Figs. 6 and 7 shows that the new algorithm has a smaller mean localization error and stronger robustness to indoor environmental disturbance. The results of research and analysis to promote the elderly healthcare will have a positive significance.