OBJECTIVE: This study determined the predictors of antidiabetes medication adherence and healthcare costs in adults with type 2 diabetes mellitus in the United States. METHODS: The 2000 Medical Expenditure Panel survey was used for the analyses. The population for analyses was identified using ICD-9 CM codes for Type-2 diabetes. The predictor variables were demographics variables, self-reported health status (EuroQol score), and health services utilization variables. The dependent variables in this analysis were diabetes medication possession (number of diabetes medication refills) and annual healthcare costs. Multivariate weighted analysis was performed to identify significant predictors of medication utilization and healthcare costs. RESULTS: There were 11.7 million patients with reported Type-2 diabetes in the United States in 2000, based on survey extrapolation. On an average, there were ten diabetes drug refills reported by patients. The average annual healthcare costs for these patients were $7,466, while the mean EuroQol summary score was 48%. Increase in the health status summary score (EuroQol) by 10% was associated with a slight (1%) decrease in diabetes drug refills (p<0.05). An additional diabetes related emergency visit or an inpatient visit was associated with a nearly 50% increase compared to the average diabetes medication utilization (p<0.01). An increase in the EuroQol score by 10% was significantly associated with decrease in annual healthcare costs by 4.5% (p <0.05). Each diabetes drug refill was significantly associated with increase in the average healthcare costs by 3.7% (p<0.001), while each diabetes related inpatient visit was associated with a 117% increase in average healthcare costs (p<0.001). CONCLUSIONS: This study showed significant associations between diabetes related utilization, health status and diabetes medication adherence. Medication utilization was further significantly associated with healthcare costs. The study findings highlight the need for maintaining improved health status, and promoting cost-effective drug therapy in Type-2 diabetes.