Medical and pharmaceutical insurance claims associated with lower extremity diabetic ulcers were examined retrospectively to better understand the costs and duration of treatment in clinical practice. The study population consisted of working-age individuals (18 to 64 years old) with health care benefits provided through private employer-sponsored insurance plans. Diagnostic information contained in the claims database was used to identify the severity of the ulcers, and the charges associated with treatment were based on claims data. Claims for lower extremity ulcers were found in 5.1% of individuals with diabetes. Although many lower extremity ulcers heal with standard treatment, some are more resistant to treatment and require costly ongoing medical care. Almost half of these cases were associated with deep infection, osteomyelitis, or amputation. Total payments for treatment of lower extremity ulcers in this population averaged $2687 per patient per year, or $4595 per ulcer episode, with inpatient expenditures accounting for more than 80% of these costs. Costs were significantly higher for patients with more severe ulcers or with inadequate vascular status in the affected limb. We concluded that lower extremity ulcers occur in a large number of working-age people with diabetes and contribute significantly to the morbidity associated with this disease. The high cost of treating diabetic foot ulcers suggested by this analysis argues for the development of better treatment strategies and outcomes assessments for these patients.