Cost savings associated with detection and treatment of diabetic eye disease has been well documented. However, the cost-effectiveness of retinopathy screening in pediatric patients with type I diabetes mellitus remains unclear. In1998, the Academy of Pediatrics released a new policy regarding the Ophthalmologic examination schedule for asymptomatic pediatric IDDM patients. Compared to other guidelines, this one required prompt initiation, more frequent eye exams, and earlier ophthalmologist referrals. OBJECTIVES: The purpose of this study was to examine the cost-effectiveness of retinopathy screening in pediatric patients with Type I diabetes under the new policy. METHODS: cost-effectiveness model was developed using Microsoft Excel 7.0, incorporating data from previous epidemiological studies and clinical trials. Markov Model was used, combined with sensitivity analysis. RESULTS: Screening in pediatric patients was not only cost effective, but was actually cost saving from the societal perspective. During the first 10 years of IDDM, retinopathy screening was very cost-effective (CER=74$/QALY at year 5). Starting from the 10th year, the intervention resulted in an increasing level of cost and QALY savings. The amount of QALY saved and cost savings both peaked at 15 to 20 years after IDDM onset. Under 100% compliance rate, screening produce average savings of $48,412 and Quality Adjusted Life Year (QALY) saved of 7.15 per patient. Our model was sensitive to the compliance rate of screening; at 50% compliance rate, the total costs for detection and treatment increased near 2-fold. Screening by ophthalmologists instead of primary care physicians reduced the total costs by 53.5%. CONCLUSIONS: Our analysis indicated that, under the new policy, the proposed program reduced QALY loss, and reduced diabetic retinopathy disease costs.