Mississippi’s attorney general says his staff won’t defend Gov. Haley Barbour in a lawsuit challenging his latest proposal to tax hospitals to generate money for the Medicaid program.

A group of about 40 hospitals have filed suit, contending Barbour should not be allowed to increase their fees to help pay for the health care program that provides coverage to children, the elderly and poor. Barbour has said his proposal, which goes into effect Sept. 1, doesn’t need legislative approval because it pertains to existing taxes.

Hinds County Chancery Judge William Singletary will hear arguments in the complaint Wednesday.

In July, Singletary ruled in a separate challenge by hospitals that Barbour cannot bypass lawmakers to create new hospital taxes.

Attorney General Jim Hood said acting as Barbour’s counsel in the latest case would create a conflict.

“I have to make sure that claims made by one branch of government do not violate the powers of the other two branches,” Hood said in an e-mail Monday. “Due to the specific issues involved in this case, we would not be able to raise defenses that could conflict with the powers of my other two clients — the legislative and judicial branches.”

Barbour said lawyers from the attorney general’s office helped develop the Medicaid plan that is being challenged. The governor’s office will hire a private attorney to defend the plan in court.

“Neither the legislative nor judicial branches are parties to the lawsuit, so it is absurd for Jim Hood to suggest some sort of conflict as his reason for begging off the case,” Barbour said in a news release. “Good lawyers do not turn their backs on their clients at the last minute. But this is not the first time Attorney General Hood has done so since I’ve been Governor. It is a shame the taxpayers of Mississippi will have to pay extra to be represented because Jim Hood has changed his mind again about who he represents.”

Hood is a Democrat and Barbour is a Republican, and they’ve been at odds about several issues over the years.

Medicaid faces a $90 million shortfall in the current fiscal year. Lawmakers say an even bigger hole is expected next fiscal year, which begins July 1, 2009.

Barbour has said his new solution would generate $88 million of the $90 million shortfall by increasing the gross revenue assessment on hospitals. He said the other $2 million would be generated through cuts of less than 1 percent on other provider services.

Under the plan, hospitals would be reimbursed with mostly federal money associated with Medicaid. But hospital officials say the plan could lead to job cuts and other budget problems.

“What we’re actually challenging is the governor’s authority to artificially raise taxes on hospitals and call those taxes legal based on Judge Singletary’s ruling,” Michael Bailey, chief financial officer for the Mississippi Hospital Association, said Monday.

MHA is not a plaintiff in the pending litigation, but several of the hospitals challenging the governor’s plan are members of MHA.