This summer, the Obama administration and Congress are planning to undertake the most significant health care reform that our country has seen since Medicare and Medicaid were introduced in the 1960s. Providing health insurance coverage for the uninsured and controlling rising health care costs are foremost on policy-makers’ minds. In particular, many agree that we must find affordable health insurance and health care for America’s 8 million uninsured children.

Many people feel that providing health insurance for children is a moral issue. Children born into families with limited financial resources deserve to have access to the same health care that other children do. At the Baker Institute for Public Policy at Rice University, we reviewed research from the economics and medical literature to see whether there are also economic consequences to the failure to provide health insurance for all children in the U.S.

Not surprisingly, past research found that health care expenditures for uninsured children are 47 percent lower than for insured children. Uninsured children are more likely to have gone without needed medical, dental or other health care. Studies indicate that lack of health insurance coverage for children leads to poorer health in childhood, greater rates of avoidable hospitalizations and higher childhood mortality. While no studies have examined the association between childhood health insurance status and adult outcomes, better health in childhood has been linked to higher incomes and wealth in adulthood. Given that the earnings differential in adulthood between healthy versus unhealthy childhood siblings can be as much as 24 percent, the long-term labor-force impact of being uninsured as a child may be significant.

The present value at birth of lifetime “health capital” lost due to lack of children’s health insurance has been estimated at $15,572 for each male and $11,646 for each female. Health capital was valued based on both the higher quality of life and longer lifespan for insured versus uninsured children. A separate study suggests that the cost of providing health insurance to each uninsured child through age 18 is $7,451 in current dollars. Thus, the costs of covering children with health insurance could be offset by the value of future health capital gained.

What would be the total additional costs of covering all uninsured children? A study published in 2008 estimated the cost of expanding health insurance coverage to all children to be $9.6 billion in 2009. This amount is relatively small, compared with the estimated additional $112.9 billion that would be required to cover uninsured adults. The $9.6 billion figure is also relatively small compared with total national health expenditures, which were estimated to reach $2.4 trillion in 2008.

Past research indicates that Medicaid expansions in the late 1980s and early 1990s that increased health insurance coverage for low-income children and pregnant women increased spending on other consumer goods by the equivalent of approximately $800 per family per year in 2009 dollars. Boosting consumer expenditures for these families by such a sizable amount in the midst of the current contraction in consumer spending would contribute significantly to a broad-based economic recovery.

The existing research indicates that covering all children in the U.S. with health insurance will be cost-saving to society. The value of improved health status and increased life expectancy due to insurance coverage outweighs the estimated incremental costs of covering 8 million children who lack health insurance. Further gains would be achieved due to the improved labor-force productivity these children would achieve in adulthood due to better health.

The question that policy-makers should be asking isn’t whether or not we should cover all children with health insurance. Instead we should be asking, Why didn’t we take steps to cover all children before?