Complications of Type 2 diabetes mellitus (DM) increase costs to the healthcare provider. Age is correlated with complications as well as costs. OBJECTIVE: To estimate diabetes-related costs due to complications separately from age. METHODS: Members with Type 2 DM were selected by ETG? group from PharMetric s Integrated Outcomes database during 1997. Charges to the member s MCO for ED, pharmacy, in- and out-patient services were tallied over CY 1997. Members were classified: (1) as having 0,1, or >1 complications (nephropathy, retinopathy, neuropathy, or CAD), and (2) by age: <18, 18-44, 45-64, or 65+. A regression of age and gender on ln(charges) was compared to a regression of age, gender, and complications. RESULTS: Over 124,000 members were included in the study, about half male and female. About 85% were 45 or older. Approximately 82,000 (66%) had 0 comorbidities, 32,500 (26%) had 1, and 10,000 (8%) had >1; 92% of those <18 had 0 comorbidities; 83% of those 18-44 did; 70% of those 45-64 did; 52% of those 65+ did. Similarly, 0.4% of those <18 had >1 comorbidity; 2.5% of those 18-44s, 6.6% of those 45-64s, and 13% of those 65+. The mean annual cost was $820; with 0 comorbidities: $575; with 1: $1,000; with >1: $2,300. The R2 for the regression without complications 0.0059, (0.6% of log charges explained by age and gender). The R2 with complications was 0.0487(5% explained by age, gender and complications). This increase was highly significant (p<0.001). CONCLUSIONS: Costs increased 8 times more due to complications than age on a log scale. Substantial savings may be realized by MCOs who manage their members diabetes well.