Type 2 Diabetes and its complications lead to higher medical care costs, beginning at diagnosis and continuing throughout life. But little is known about health care expenditures and utilization prior to recognition of DM2. We identified all members of Kaiser Permanente Northwest Region, a nonprofit HMO, diagnosed with DM2 in 1988 through 1995, and matched each of them to an HMO member without DM based on age, gender and eligibility. We then observed outpatient, pharmaceutical, and inpatient costs in the eight years prior to diagnosis and calculated incremental costs as the difference between DM2's and their matched controls. Total costs for DM2's and their matched controls were relatively flat four to eight years prior to diagnosis of DM2; incremental costs were not significantly different from zero in those years. In the three years immediately before diagnosis, however, DM2 costs rose while control costs remained flat. By this measure, DM2 appears to cause significant excess total costs, starting about three years prior to diagnosis. Considered on their own, though, outpatient and pharmacy costs each exceeded control costs during all eight pre-diagnostic years. The majority of incremental costs were for outpatient visits (62%). We conclude that DM2 begins causing greater health expenditures at least eight years before diagnosis. Per-Person Medical Costs by Year Prior to Diagnosis of DM2 No. of Cases Pre-DX Year DM2 Costs Control Costs Incremental Costs Percent Incremental 708 -8 $1,774 $1,712 $ 62 3% 1493 -7 2,144 1,767 377 18% 2397 -6 1,872 1,792 80 4% 3323 -5 2,208 2,005 203 9% 4269 -4 2,238 2,044 194 9% 5327 -3 2,474 1,911 563 23% 6490 -2 2,536 1,978 558 22% 8685 -1 2,819 1,949 870 31%