OBJECTIVES: Diabetes imposes a substantial health and economic burden to patients and society. This study analyzed the lifetime healthcare expenditures and life years lost associated with diabetes in the United States. METHODS: Data from the National Health Interview Survey (NHIS), the NHIS linked Mortality Public-use Files, and the Medical Expenditure Panel Survey from 1997 to 2000 were used to estimate age-, race-, sex-, and body mass index (BMI)-specific risk of diabetes, mortality, and annual healthcare expenditures for both diabetics and non-diabetics. A Markov model populated by the risk estimates was used to compute life expectancy and total lifetime healthcare expenditures by age, race, sex, and BMI for diabetics and non-diabetics. RESULTS: Predicted life expectancy was longer for females than males and whites and other races than blacks. Predicted life expectancy for diabetics and non-diabetics consistently demonstrated an inverted U-shape for BMI across all subgroups, with highest life expectancy being for the overweight. Using U.S. adults aged 50 years as an example, we found that the life years lost associated with diabetes for white females with a BMI above 40 kg/m was 12.3 years. Black females of the same age and degree of obesity lost 11.2 life years, followed by white males (7.0 years) and black males (5.4 years). Lifetime healthcare expenditures between individuals with and without diabetes with a BMI above 40 kg/mvaried by race and gender:  white females ($48,848), black females ($47,787), white males ($31,189), and black males ($26,634).   CONCLUSIONS: Our results show that obesity is associated with large decreases in life expectancy and large increases in lifetime healthcare expenditures. In addition, diabetes decreased life expectancy by 2.6 to 23.4 years and increased lifetime healthcare expenditures by $6,048 to $121,247 depending on age, gender, race, and BMI classification.