OBJECTIVES: To examine the impact of income on medication adherence and to describe out-of-pocket (OOP) costs relative to household income. METHODS: This was a retrospective study using the Medicare Expenditure Panel Survey database including the years 2005 through 2013. Eligible patients with type 2 diabetes mellitus (T2DM) were aged at least 18 years and had continuous eligibility for at least one year. All analyses accounted for the survey’s nationally representative and complex design including strata, clusters, and weighting. Multivariate logistic regression models controlled for sociodemographic and clinical variables. To describe the burden of OOP costs relative to household income, all income levels were included. RESULTS: A total of 2,380 patients were assessed (mean age: 63.0 years; median annual household income: $39,954). Results from the multivariate logistic regression model indicated patients below the Federal poverty line were less likely to be adherent (odds ratio: 0.67; 95% confidence interval: 0.51 to 0.89; p=0.005). Median total annual OOP cost for diabetes-related medications was $65.99, or 0.2% of the median annual household income. Median total annual OOP cost for all medications was $492, or 1.2% of the median annual household income. Median annual OOP cost for all healthcare expenditures was $866, or 2.1% of the median annual household income. The percentage of annual diabetes-related medications OOP costs relative to all annual healthcare-related costs was 10.6%. For patients to become 80% adherent to all medications, they would hypothetically increase costs by approximately $14 per year, or an increase of 0.035% of the median annual household income. CONCLUSIONS: Patients below the Federal poverty line are less likely to be adherent compared to patients above the Federal poverty line.  Additional OOP costs for patients with T2DM to become adherent to medications may be offset downstream through use of fewer healthcare resources; however, future studies are needed.