Objective: To evaluate the one to two year changes in healthcare costs and disease-related process measures associated with the a disease management program initiated in 2002 for higher-risk, higher-expenditure adult fee-for-service Medicaid clients with diabetes in the State of Colorado, United States. Methods: This retrospective database analysis employed a pre-post and propensity-score matched analysis assessing direct costs from the perspective of a public payer. Data analyzed included comprehensive medical and pharmacy claims, patient demographics (i.e., age, gender, race), medical and pharmacy resource utilization claims (e.g., selected prescription drug use and laboratory testing procedures conducted), diagnostic information, and eligibility/enrollment status. Multivariate regression techniques were utilized to ascertain differences between the disease management and matched comparator groups. Results: Of the 388 Medicaid clients that were eligible and initially contacted for enrollment, 41 (11%) completed at least one year and 10 (3%) completed an entire two years of the program. Enrollees were typically older, female, and of a non-white race or ethnicity. Among those enrolled for one year or more, significant decreases in overall medical costs were observed relative to matched comparators during both Year 1 and Year 2 of the interventions (Year 1 = 44.4% decrease, p<0.001 and Year 2 =67.1% decrease, p<0.010). Overall pharmacy costs were lower for the disease management group during Year 2 (64.0% decrease, p=0.013), as were diabetes-related pharmacy costs (64.9%, p=0.005). Effect sizes based upon multivariate analyses were observed to be small. Conclusion: Based on this analysis of 41 clients completing at least one year of diabetes disease management program, significantly lower costs were noted during Year 1 which continued and expanded through Year 2 relative to matched comparators. Beyond claims analyses, however, incremental cost-effectiveness of disease management programs must also consider program-specific expenditures and clinical outcome measures.