OBJECTIVES: Diabetes is still one of the serious and expensive health problems in the US and often associated with comorbidities. Compared with the general population, individuals diagnosed with diabetes are 60% more likely to be diagnosed with depression. The goal of this study is to conduct cost analysis estimating excess health care expenditures associated with depression among adults with diabetes by comparing them to those with diabetes and without depression. METHODS: In this cross-sectional study, the 2013 Medical Expenditure Panel Survey (MEPS) was used to analyze data on 2,771 adults with diabetes. Individuals with depression were identified using ICD-9-CM and clinical classification codes. Adjusted mean direct health care utilization and expenditures associated with ambulatory visits, emergency department visits and prescription drugs per person in 2013 were estimated using analysis of covariance after adjusting for age, gender, race/ethnicity and number of comorbidities. RESULTS: Out of 2,771 individuals with diabetes, approximately 16% (N= 443) had depression. Adjusted mean health care utilization analysis showed that depressed adults with diabetes had more ambulatory visits (10 vs 6) and used more number of prescription medications (47 vs 22) as compared to non-depressed individuals. Unadjusted mean expenditures for diabetic individuals with depression were $11,572 relative to $8,576 for no depression. After controlling for demographic and number of comorbidity covariates, it was found that an individual with diabetes and depression had significantly greater annual mean health care expenditure of $4,192 compared to that of $2,012 for an individual with diabetes but no depression. Expenses related to ambulatory visits ($1,415 vs $1,041) and prescription medications ($2,769 vs $968) found to be major contributing factors in excess health care expenditure associated with comorbid depression. CONCLUSIONS: Depression is a significant contributor to the economic burden among individuals with diabetes, such incremental expenditures can be due to increased health care utilization.