Gov. Sonny Perdue urged Congress on Tuesday to pass a children's health insurance program that doesn't punish Georgia for covering more kids.

The Republican governor told a House health subcommittee that the current State Children Health Insurance Program is based on a flawed formula that has reduced federal funding for his state as Georgia enrolled more children from low-income families.

"Georgia has done well in implementing SCHIP," Perdue told the subcommittee. "We've done too well, in fact. We've been penalized for it."

Georgia is the ninth largest state in the country but has the fourth largest program — called PeachCare for Kids, Perdue testified. The state and federal government share the funding and eligible families also must contribute, he told the House Energy and Commerce subcommittee on health.

Focusing on families that make too much for Medicaid but still can't afford private insurance, Georgia limits eligibility to 235 percent of the federal poverty level — an income of $49,820 a year for a family of four.

"SCHIP is not a government handout. It's not for unemployed families on welfare," Perdue said. "It helps the children of working parents who not only pay their taxes, but who also pay premiums for the insurance their children receive."

But when a child receives coverage under PeachCare, he or she no longer counts as uninsured in the formula that determines how much money a state gets.

"The better you are at implementing SCHIP, the less funding you receive," Perdue said. "If a state was 100 percent successful and reached all eligible uninsured children, it's funding the next year would be drastically cut because no children would be uninsured."

Republicans in the House have twice sustained President Bush's veto of an expansion of SCHIP that was passed by both the House and Senate. Bush said the legislation extends the coverage beyond the initial focus on children of the working poor and encourages middle-class families to switch from private health insurance to the government program. But subcommittee chairman Frank Pallone (D-N.J.) accused Bush of waging "ideological warfare" and having "ignored the needs of hardworking American families."