regard to whether final regulations to carry out such 
amendments have been promulgated by such date. 
SEC. 302. STATE OPTION TO PROVIDE COVERAGE OF CHIL-
DREN UNDER SCHIP IN EXCESS OF THE 
STATE’S ALLOTMENT. 
(a) IN GENERAL.—Title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.) is amended by adding at 
the end the following: 
‘‘SEC. 2111. STATE OPTION TO PROVIDE COVERAGE OF 
CHILDREN IN EXCESS OF THE STATE’S AL-
LOTMENT. 
‘‘(a) STATE OPTION.—In the case of a State that 
meets the condition described in subsection (b), the fol-
lowing shall apply: 
‘‘(1) Notwithstanding section 2105 and without 
regard to the State’s allotment under section 2104, 
the Secretary shall pay the State an amount for 
each quarter equal to the enhanced FMAP of ex-
penditures incurred in the quarter that are described 
in section 2105(a)(1). 
‘‘(2) The Secretary shall reduce the State’s al-
lotment under section 2104, for the first fiscal year 
for which the State amendment described in sub-
section (b) applies, and for each fiscal year there-
after, by an amount equal to the amount that the 
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Secretary determines the State would have expended 
to provide child health assistance to targeted low-in-
come children during that fiscal year if that State 
had not elected the State option to provide such as-
sistance in accordance with this section. 
‘‘(3) Subsections (f) and (g) of section 2104 
shall not apply to the State’s reduced allotment 
(after the application of paragraph (2)). 
‘‘(b) CONDITION DESCRIBED.—For purposes of sub-
section (a), the condition described in this subsection is 
that the State has made an irrevocable election, through 
a plan amendment, to provide child health assistance to 
all targeted low-income children residing in the State 
(without regard to date of application for assistance) and 
to cover health services listed in the State plan whenever 
medically necessary.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section takes effect on October 1, 2008, and applies 
to child health assistance provided on or after that date, 
without regard to whether final regulations to carry out 
such amendment have been promulgated by such date. 
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Subtitle B—Refundable Tax Credit 
for Health Insurance Costs of 
Low-Income 
Individuals 
and 
Families 
SEC. 311. CREDIT FOR HEALTH INSURANCE COSTS OF CER-
TAIN LOW-INCOME INDIVIDUALS. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to refundable credits) is amended by redes-
ignating section 36 as section 37 and inserting after sec-
tion 35 the following new section: 
‘‘SEC. 36. HEALTH INSURANCE COSTS OF ELIGIBLE LOW-IN-
COME INDIVIDUALS. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this subtitle for the taxable year an amount equal to 
the applicable percentage of the amount paid by the tax-
payer (or on behalf of the taxpayer) for coverage of the 
taxpayer or qualifying family members under qualified 
health insurance for eligible coverage months beginning in 
such taxable year. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
the term ‘applicable percentage’ means the standard 
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Government contribution (determined for full-time 
Federal employees enrolling in coverage for which 
such 
contribution 
is 
not 
limited 
by 
section 
8906(b)(1) of title 5, United States Code) for an 
employee enrolled in a health benefits plan under 
chapter 89 of title 5, United States Code, for the 
calendar year in which the taxable year begins, ex-
pressed as a percentage of the total premium for 
such plan. 
‘‘(2) INCREASED
PERCENTAGE
FOR
CERTAIN 
TAXPAYERS.— 
‘‘(A) IN GENERAL.—In the case of a tax-
payer whose adjusted gross income for the pre-
ceding taxable year does not exceed 150 percent 
of the poverty level, the applicable percentage 
determined under paragraph (1) shall be in-
creased by such percentage points as the Sec-
retary determines will fully compensate such an 
individual for the individual’s limited pur-
chasing power in comparison to individuals 
whose adjusted gross income equals the average 
adjusted gross income for all Federal employ-
ees, to the extent that the amount of the result-
ing increase in the credit amount for all such 
eligible low-income individuals for the taxable 
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year is not reasonably expected to exceed the 5 
percentage point dollar amount for that year, as 
determined under subparagraph (B). 
‘‘(B) DETERMINATION OF 5 PERCENTAGE 
POINT DOLLAR AMOUNT.—For purposes of sub-
paragraph (A), the 5 percentage point dollar 
amount for any taxable year is the product of— 
‘‘(i) the total number of individuals 
receiving credits under this section for 
such year; and 
‘‘(ii) the amount equal to 5 percent of 
the average health insurance premium 
amount to which such credits are applied. 
‘‘(C) RULE OF CONSTRUCTION.—Nothing 
in this paragraph shall be construed to prevent 
the Secretary from establishing more than 1 
level of supplemental assistance that provides 
greater assistance to individuals with lower in-
come, determined as a percentage of poverty. 
‘‘(3) APPLICATION OF FEHBP COVERAGE CAT-
EGORIES TO DETERMINATION OF CREDIT.—The per-
centages described in paragraphs (1) and (2) shall 
be applied to a taxpayer consistent with the coverage 
categories (such as self or family coverage) applied 
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