The objective was to estimate health care costs and utilization for Medicare beneficiaries with type 1 (T1DM) or type 2 (T2DM) diabetes and their respective matched control cohorts. A retrospective claims cohort analysis was used to assess direct health care cost and utilization of health services in 2009 for patients aged 65-89 who were enrolled in a Medicare Advantage Plus prescription drug plan. Patients were matched 1:1 with patients without diabetes. All-cause health care costs for 2009 were calculated as the sum of all medical and pharmacy claims. The analysis included 6562 patients with T1DM and an equal number of matched controls, and 194,775 patients with T2DM and an equal number of matched controls. There were no significant demographic differences between cohorts for matched variables. Patients with T2DM had significantly higher mean Deyo/Charlson Comorbidity Index scores compared with their controls (2.47 versus 0.77; P<0.001), although all groups reported a high rate of costly comorbidities such as hypertension and heart disease. Mean all-cause health care costs per patient per year were significantly higher for patients with T1DM and T2DM versus controls for inpatient hospitalizations; outpatient, office, and emergency room visits; pharmacy expenditures; and total health care costs for 2009 (T1DM group: $20,701±$30,201; T1DM-matched control group: $6,537±$10,441; T2DM group: $10,437±$18,518; T2DM-matched control group: $6,505±$11,140). Diabetes escalates health care costs for Medicare Advantage Plus patients compared with patients in the same plan without diabetes, regardless of comorbidities.