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Objective: To examine the annual cost profiles of Medicare beneficiaries with diabetes to identify patterns in their consumption of benefits., Methods: Retrospective expenditure data were collected from Medicare records. Beneficiaries with diabetes were grouped into 5 consumption clusters ranging from "crisis consumers" at the high end to "low consumers" at the low end., Results: The percentages of beneficiaries and expenditures for the consumption clusters remained generally constant from year to year. As expected, most of Medicare's budget each year was spent on crisis, heavy, and moderate consumers. However, a notable proportion of low and light consumers from one year go on to become crisis and heavy consumers in subsequent years. A review of total 2001 through 2006 inpatient costs for the year 2000 clusters revealed that 47% of these costs were for year 2000 low and light consumers and only 27% were for year 2000 crisis and heavy consumers., Conclusions: This analysis revealed previously unrecognized trends, whereby a notable proportion of low and light consumers during one year went on to become crisis and heavy consumers in subsequent years, representing a large proportion of inpatient costs. These findings have important implications for disease management programs, which typically focus intervention efforts exclusively on crisis and heavy consumers.