We studied the impact on annual medical care utilization and costs in 1988 of cardiovascular disease (CVD) in a population-based sample of 435 diabetic (DM) and 435 matched non-DM members of a Health Maintenance Organization. 58% of DM had at least one diagnosed CVD, compared to 26% of non-DM. 22.7% of outpatient visits, 38.7% of hospital days, and 30% of pharmacy expenditures by those with DM were primarily attributable to CVD. Up to 27% of all CABG recipients in the population had diabetes. In total, CVD directly accounted for at least 24% of total medical care costs among DM, compared to 12% of costs for non-DM. The HMO spent 4.5 times per person more on CVD care in DM than in non-DM members. Treatment with insulin was associated with increased peripheral vascular disease. After adjusting for age, CVD was more prevalent and generated longer hospital stays in DMs with nephropathy. The etiologic association between CVD and DM is well documented but CVD's clinical and economic importance in DM seems underappreciated.