OBJECTIVES:   To estimate health care costs and utilization for Medicare beneficiaries with type 1 or type 2 diabetes and matched control cohorts.   METHODS:   We used a retrospective claims cohort analysis to assess the direct healthcare cost and utilization of health services in 2009 for patients aged 65 to 89 enrolled in a Medicare Advantage plus prescription drug plan.  Patients were matched 1:1 with non-diabetes patients. All-cause health care costs for 2009 were calculated as the sum of all medical and pharmacy claims, and costs directly attributable to diabetes were evaluated for case cohorts.  RESULTS:   Our analysis included 6,562 type 1 cases and the same number of matched controls, and 194,775 type 2 cases and their matched controls. There were no significant demographic differences between cohorts for matched variables.  Type 2 cases had significantly higher mean Deyo-Charlson Comorbidity Index compared to controls (2.47 versus 0.77; p<.001), although all groups had high prevalence of expensive comorbidities such as hypertension and heart disease.  Mean all-cause healthcare costs per patient per year were significantly higher for type 1 and type 2 cases versus controls for in-patient hospitalization, outpatient, office, ER visits, pharmacy and total health care costs (total 2009 costs: type 1 $20,701+$30,201, type 1 controls $6,537+$10,441, type 2 $10,437+$18,518, type 2 controls $6,505+$11,140). The mean diabetes attributable total health care cost for type 1 and type 2 cohorts were $9,443 + $15,665 and $3,616 + $9,229, respectively, per patient per year.  CONCLUSIONS:  Diabetes escalates health care costs for Medicare Advantage patients in comparison to those without the disease regardless of comorbidities.