OBJECTIVE: To develop a model to evaluate the cost-effectiveness of starting patients with Diabetes Mellitus on lifelong therapy with ACE-Is immediately on diagnosis. Although apparently already a dominant strategy for renal protection in diabetes, ACE-Is are not prescribed to patients immediately on diagnosis of Type II diabetes. Determining whether they have overall cost-effectiveness in preventing cardiac endpoints may be useful in updating treatment guidelines. METHODS: Interventions: Treating patients with DM with ACE-Is immediately on diagnosis vs. not using ACE-Is. Design: Age-specific lifetime costs and QALYs associated with each of the endpoints: MI, stroke and ESRD, were estimated for each intervention strategy. Time Horizon: Lifetime. Perspective: Societal. Target Population: The model was estimated in females aged 40 and over. Model measures: discounted lifetime cost, discounted quality-adjusted life expectancy for each strategy. Incremental cost-effectiveness ratio. Data Sources: Randomized control trials estimating the effect of ACE-Is on the occurrence of each endpoint, life tables for mortality and life expectancy data, epidemiological and observational studies to estimate the added risk for each endpoint contributed by diabetes, and quality of life/health utility studies to estimate QALYs associated with each endpoint. RESULTS: Base-Case Analysis: Immediately starting therapy with ACE-Is was shown to be a dominant strategy. Starting from age 40, this strategy would save total discounted lifetime costs of $63,835 and improve discounted quality-adjusted life expectancy by almost 2 years. Sensitivity Analysis: Although still indicating a dominant strategy, both lifetime costs and QALYs are sensitive to the discount rate used, and lifetime costs are highly sensitive to the lifetime cost of ESRD management. CONCLUSIONS: Starting all patients with Type II DM on lifelong ACE-I therapy is a simple strategy that provides greater benefit at a lower cost. It may be worth considering its implementation as a standard diabetes patient management strategy.