WASHINGTON - Large amounts of federal money intended to provide health insurance to children are going unused, federal officials say, even though 8.5 million children are uninsured.

On Oct. 1, states lost $1.2 billion that had been appropriated by Congress to provide health coverage for low-income children. The money, unclaimed after four years, reverted to the Treasury and can be used for other purposes - including law enforcement, military pay, farm subsidies or the fight against terrorism.

Thomas A. Scully, administrator of the federal Centers for Medicare and Medicaid Services, said he hoped that Congress would pass legislation to restore the money to the Children's Health Insurance Program.

"States should find some way to use that money to cover the uninsured," Scully said. "If you don't use it, you lose it."

President Bush foresaw the problem. In his budget, issued in February, he asked Congress to let states keep the money until 2006. Several senators have introduced bills to extend the deadline for use of the money, while redirecting some of it to states most likely to spend it.

Congress has not taken action on any of the proposals even though lawmakers often lament that millions of children are uninsured according to the Census Bureau.

State officials, struggling with severe budget problems, are pleading with Congress to extend the deadline for them to use the federal money.

Gov. Frank L. O'Bannon of Indiana, a Democrat, said he and other governors feared that "if this money is lost, the federal government's growing budget deficit will make it difficult to recover it at a later date."

Jason Cooke, director of the Children's Health Insurance Program in Texas, which provides coverage for 510,000 youngsters, said: "It would be most unfortunate if the money stays in the federal Treasury. There is still lots of unmet need."

The Bush administration estimates that states will lose $1.6 billion more next year if Congress takes no action, in addition to the $1.2 billion lost this year.

The recession has increased the number of people without insurance.