Recent assessments of acute episodes of care point to productivity growth stemming from improvements in patient outcomes. This study assesses productivity growth in the treatment of a major chronic condition, specifically, type 2 diabetes. Analyzing traditional Medicare beneficiaries with new diagnoses over 2004-2012, we find that the productivity of health care improved at an annualized rate of 2.2%. In this context productivity growth translated into only modest improvement in patient outcomes; most of the growth was realized in the form of lower treatment costs. These findings are robust to a range of sensitivity analyses.