Objective To determine the impact of state Medicaid diabetes disease management programs on emergency admissions and inpatient costs. Data National InPatient Sample sponsored by the Agency for Healthcare Research and Quality Project for the years from 2000 to 2008 using 18 states. Study Design A difference‐in‐difference methodology compares costs and number of emergency admissions for Washington, Texas, and Georgia, which implemented disease management programs between 2000 and 2008, to states that did not undergo the transition to managed care (N = 103). Data Extraction Costs and emergency admissions were extracted for diabetic Medicaid enrollees diagnosed in the reform and non‐reform states and collapsed into state and year cells. Principal Findings In the three treatment states, the implementation of disease management programs did not have statistically significant impacts on the outcome variables when compared to the control states. Conclusions States that implemented disease management programs did not achieve improvements in costs or the number of emergency of admissions; thus, these programs do not appear to be an effective way to reduce the burden of this chronic disease.