yes, technically you are correct. but, depending on the individual condition on the severity and management of the disease which will be indicated by tests and Dr evaluation, they may be able to pass the medical exam. but if they are on the verge of losing a toe because of it, yes, it is severe enough not to pass the medical exam. My assumption was a regular person with diabetes that has to just monitor their glucose level and use insulin regularly and their condition has remained the same and under control for a long time.
In a very general view, yes you are correct, even controlled diabetes is a serious matter, I did not mean to downplay anyone's situation.