OBJECTIVE This study analyzed the lifetime health care expenditures and life years lost associated with diabetes in the U.S. RESEARCH DESIGN AND METHODS Data from the National Health Interview Survey (NHIS), the Medical Expenditure Panel Survey from 1997 to 2000, and the NHIS Linked Mortality Public-use Files with a mortality follow-up to 2006 were used to estimate age-, race-, sex-, and BMI-specific risk of diabetes, mortality, and annual health care expenditures for both patients with diabetes and those without diabetes. A Markov model populated by the risk and cost estimates was used to compute life years and total lifetime health care expenditures by age, race, sex, and BMI classifications for patients with diabetes and without diabetes. RESULTS Predicted life expectancy for patients with diabetes and without diabetes demonstrated an inverted U shape across most BMI classifications, with highest life expectancy being for the overweight. Lifetime health care expenditures were higher for whites than blacks and for females than males. Using U.S. adults aged 50 years as an example, we found that diabetic white females with a BMI >40 kg/m2 had 17.9 remaining life years and lifetime health expenditures of $185,609, whereas diabetic white females with normal weight had 22.2 remaining life years and lifetime health expenditures of $183,704. CONCLUSIONS Our results show that diabetes is associated with large decreases in life expectancy and large increases in lifetime health care expenditures. In addition to decreasing life expectancy by 3.3 to 18.7 years, diabetes increased lifetime health care expenditures by $8,946 to $159,380 depending on age-race-sex-BMI classification groups.