OBJECTIVE: To determine direct medical cost of diabetes mellitus (DM) patients with and without complications and co-morbidity in government hospitals in Thailand. METHODS: A cross-sectional, prevalence based study of costs of diabetes was done. Electronic financial databases of four purposively selected hospitals (one teaching and three general) were retrieved for fiscal year 2003. Diabetes patients were identified by ICD10 diagnosis code of E10 to E14 and further classified into five categories as: 1) DM only; 2) DM + co-morbidity (hypertension and dyslipidemia); 3) DM + microvascular (nephropathy, neuropathy, retinopathy, foot ulcer, renal failure, blindness, etc); 4) DM + macrovascular (coronary artery disease, cerebro-vascular disease, and peripheral vascular disease); and 5) DM + micro-macrovascular complications. Both outpatient and inpatient resource uses (lab, x-rays, hospitalization, drugs and medical supplies, etc.) were aggregated and costs as charge were determined for each individual. For data accuracy, diagnosis electronic data were cross-validated with 962 patient chart review and results revealed that microvascular complications and co-morbidity were under-diagnosed, sometimes as much as 95%. RESULTS: Overall, 24,053 DM patients were identified (1% type I), with 59 years average age and two-thirds female. Forty percent was DM only and 25% each with microvascular and with co-morbitity, 6%, and 4% with macrovascular and micro-macrovascular complications respectively. Twenty-five percent of patients had at least one hospital admission. For average annual direct medical costs per capita, DM only incurred $281 ($1 = 40 Thai baht), and increased to 1.2-fold ($332), 2.1-fold ($584), 4.6-fold ($1292), and 5.7-fold ($1611), with co-morbidity, microvascular, macrovascular and micro-macrovascular complications respectively. Patients with hospitalization accounted for 51% of total costs. CONCLUSIONS: Diabetes complications has high prevalence in Thailand and incurred higher health resources, therefore, long-term prevention strategies should be implemented for better disease management and overall health care cost reduction.