To analyze the excess costs of medical care during the first decade after diabetes diagnosis, we surveyed two national incidence cohorts who contracted diabetes at age of 15-34 years and matched control groups from the general population of Sweden. Ninety percent of the diabetic subjects were on insulin treatment. Data on healthcare utilization and use of glucose lowering drugs and medical devices were collected via a questionnaire mailed to a recent cohort 1 year after diagnosis and a previously registered cohort 8 years after diagnosis. Costing was based on average national costs of hospital inpatient and out-patient care, an original study of daycare costs, and sales prices of the National Corporation of Swedish Pharmacies. One year after diabetes diagnosis, the annual excess costs of care were US$4743 among men and US$4976 among women (1997 prices). Hospital inpatient care accounted for more than 50% of the excess costs. Eight years after diagnosis, the excess costs were US$2010 among men and US$2734 among women. The higher costs for women were mainly related to hospital out-patient care, but also to more intensive self-monitoring. We conclude that diabetes in young and middle-aged people is a major economic challenge even before significant complications may have developed.