OBJECTIVES: To estimate the impact of achieving the American Diabetes Association (ADA) goal for glycemic control (HbA1c<7.0%) on long-term costs associated with managing the complications of Type II diabetes. The ADA also sets goals for blood pressure (systolic <130mmHg and diastolic<80mmHg), lipids (LDL-C<100mg/dL, HDL-C>40mg/dL men, 50mg/dL women, triglycerides<150mg/dL). There is evidence many do not achieve these targets, and have sub-optimal control of cardiovascular risk factors. METHODS: A discrete event simulation of the long-term economic impact of complications (cardiovascular and microvascular) for patients with Type II diabetes was developed. Model parameters and risk functions for complications were based on the UKPDS, Saskatchewan health database analyses, and literature. A cohort is created by reading in profiles including age (mean 59.3 years), gender (57% male), blood pressure (mean SBP 132 mmHg), and lipids (mean total cholesterols 5.32 mmol/L) extracted from patients with Type II diabetes diagnosed for less than 5 years in NHANES 2001-2002. Two cohorts were simulated with HbA1c less than and above 7%. One hundred replications of 1000 patients were run over 20 years. Direct medical costs reported in 2004USD ($) include hospital admission, outpatient, and routine care. RESULTS: The average cost per patient who were above goal (mean baseline HbA1c 9%) over 20 years was predicted at $38,137 compared to $26,882 for patients at goal (mean baseline HbA1c 6%). Complication rates were lower in patients at goal: 29% fewer cardiovascular and 36% fewer microvascular complications. Average life expectancy was 13.49 years, 0.44 years longer than those not at goal. Although over the first 10 years, cardiovascular related costs were majority of the total costs accrued, microvascular complications developed later in the course of diabetes and their costs became majority over 20 years. CONCLUSION: Patients achieving the recommended glycemic goals are expected to substantially decrease complication costs and complications rates.