Aims: To quantify the incremental direct medical costs in people with diabetes from the healthcare system perspective; and to identify trends in the incremental costs.

Methods: This was a matched retrospective cohort study based on a linked data set developed for investigating chronic kidney disease in Tasmania, Australia. Using propensity score matching, 51,324 people with diabetes were matched on age, sex and residential area with 102,648 people without diabetes. Direct medical costs (Australian dollars 2020–2021) due to hospitalisation, Emergency Department visits and pathology tests were included. The incremental costs and cost ratios between mean annual costs of people with diabetes and their controls were calculated.

Results: On average, people with diabetes had healthcare costs that were almost double their controls ($2427 [95% CI 2322–2543]; ratio 1.87 [95% CI 1.85–1.91]; pooled from 2007–2017). While in the first year of follow-up, the costs of a person with diabetes were $1643 (95% CI 1489–1806); ratio 1.83 (95% CI 1.76–1.92) more than their control, this increased to $2480 (95% CI 2265–2680); ratio 1.69 (95% CI 1.62–1.77) in the final year. Although the incremental costs were higher in older age groups (e.g., ≥70: $2498 [95% CI 2265–2754]; 40–49: $2117 [95% CI 1887–2384]), the cost ratios were higher in younger age groups (≥70: 1.52 [95% CI 1.48–1.56]; 40–49: 2.37 [95% CI 2.25–2.61]).

Conclusions: Given the increasing burden that diabetes imposes, our findings will support policymakers in future planning for diabetes and enable targeting sub-groups with higher long-term costs for possible cost savings for the Tasmanian healthcare system.