(A) In computing a family’s income for purposes of paragraph (1), there shall be excluded any costs (whether in the form of insurance premiums or otherwise and regardless of whether such costs are reimbursed under another public program of the State or political subdivision thereof) incurred by such family for medical care or for any other type of remedial care recognized under State law or, (B) notwithstanding section 1396 o of this title at State option, an amount paid by such family, at the family’s option, to the State, provided that the amount, when combined with costs incurred in prior months, is sufficient when excluded from the family’s income to reduce such family’s income below the applicable income limitation described in paragraph (1). The amount of State expenditures for which medical assistance is available under subsection (a)(1) will be reduced by amounts paid to the State pursuant to this subparagraph.