Sen. Luther Olsen, R-Ripon, says that the hospital assessment is "really a tax" because the state is taking more from hospitals than they need to in order to maximize federal funding.

"We're taxing hospitals 33 percent more than we need to," Olsen said. "In essence this is a hospital tax because it's going to the general fund."

This year, hospitals will be assessed a total of $275 million. Of that, the state will "skim" $79 million, which will be put in a Medicaid trust fund and used to implement a health insurance program for childless adults. In turn, hospitals will receive $477 million in federal funds.

In 2009-10, hospitals will be assessed $310.5 million. Of that the state will keep $106 million. The federal government will send back $503 million.

In 2010-11, the state will assess hospitals $340 million and skim $119 million. Coming back from the feds will be $551 million.

"A third of this is a hospital tax, two-thirds of it is working the system," Olsen said.

Sen. Miller responded that Wisconsin is always ranked among the lowest states in return of federal dollars compared to taxes paid. Miller said the assessment helps the state recapture $925 million from the feds that ordinarily would not be returned.

-- By Greg Bump