We set out to determine the present proportion of in-patient revenue used for the care of diabetes and its related complications and to use these data to determine (1) the trend in future hospital costs for the condition and (2) the excess cost of admissions for diabetic patients over and above that expected had these patients not had diabetes, using a cross-sectional descriptive study in conjunction with a population modelling exercise in a District Health Authority with a resident population of 408 000 people. The crude proportion of admissions for people with diabetes was 7.0% of activity in financial year 1994/5 (of 115929 total in-patient and day case admissions). Patients with diabetes occupied 10.7 % of bed days and had a crude mean length of stay of 10.7 days vs 6.7 days for the non-diabetic group. The proportion of revenue used for their treatment was 8.7 %. This translated locally to 11.9 M. In year 2011 overall cost of in-patient care is predicted to increase by 9.4 %, however, the proportion of revenue used for the care of people with diabetes will increase by 15% because of age-related effects. The excess cost associated with treating diabetes is estimated to be 82% of admissions for the diabetic population, 88% of their bed days, and 86% of expenditure associated with their care. Most of this excess cost is associated with the recognised vascular complications of diabetes. We conclude that the cost of in-patient care for patients with diabetes is notably disproportionate to the population prevalence of diabetes-9 % compared to 1.36% in South Glamorgan-and will increase disproportionately with time. As much of the long-term morbidity is known to be preventable by earlier intervention, strategies should reflect the imperative to reduce the burden of diabetes.