Objective:  To examine the variation in health care use and charges for children enrolled in a state Title XXI Children’s Health Insurance Program.  Children were grouped into mutually exclusive categories according to their health status ranging from healthy to catastrophic medical conditions.  Methods: Enrollment and claims data were used to classify 137474 children (aged 0-19 with 12 months continuous enrollment) into nine Clinical Risk Group (CRG) categories using the CRG software.  Use and charges per member months were separately assessed for inpatient (such as facility and physician) and outpatient (such as physician, surgery, ancillary and ER) services within each CRG category (such as healthy, multiple minor chronic, malignancies and catastrophic).  Results:  The data indicated that use and charges significantly increase for all inpatient and outpatient services for children grouped into CRG categories with increasing deterioration of health status.  While children in CRG healthy category on average incurred charges ($85.21, mean charge per member month) below the charges for all children in the sample ($133.64, mean charge per member month), children with serious medical conditions incurred charges 1.82 to 33.90 times more than charges for all children in the sample.  Conclusions:  This study shows variations in patterns of health care use and charges for children enrolled in a Title XXI Program who have or are at risk for developing chronic physical, developmental and behavioral conditions compared to use and charge patterns for healthy children.  These results have important policy implications, especially in formulating strategies for reimbursement rate setting.