There is now unmistakable evidence that a death spiral is in progress in health care, particularly health insurance premiums. The death spiral is in its early stages. Both bubbles and death spirals end the same way -- they both end in a bust. The bear market will have a strong influence on how fast the death spiral unfolds in the years ahead.
While bubbles are motivated by exuberant optimism, death spirals are motivated by a combination of greed on the part of insurance companies and people dropping their coverage because they can no longer afford it. They differ in how they are fueled, but they both end the same way once they go critical.
According to the latest report from the Kaiser Family Foundation, health insurance premiums rose 9% last year with health insurance premiums for family health benefits exceeding $15,000 a year. Health insurance premiums have risen 113% since 2001, much faster than the rate of consumer price inflation. There has been a lot of speculation that health insurance companies are raising premiums at a fast clip in anticipation of new rules under "ObamaCare" that go into effect in 2012, which would require health insurance companies to justify annual premium increases of over 10%.
Even if premium increases were to be limited to 10% a year starting in 2012 due to a constraint implemented by "ObamaCare", a death spiral could still unfold. What matters is how fast premiums are rising relative to wages. Wage deflation has been unfolding since the bear market started in 2000. As the worst part of "The Great Deflation" starts unfolding with Primary wave  down (2011 - 2016), deflation will unfold in full force, which includes wage deflation. In the coming years, as "The Great Deflation" unfolds in full force, wages are likely to fall around 25% a year. The result is that health insurance premiums rise 35% a year relative to wages starting in 2013.
The death spiral is still in its early stages, but we are already seeing the effects of the death spiral as rising health care costs are resulting in people (even those that have coverage) putting off necessary health care. Medical bills are already blamed for 62% of the bankruptcies that are filed, and in 78% of the cases, the person had health insurance. The death spiral in health care is already recognized by a number of people.
The more devastating effects of the death spiral are still in the future. Once the effect of "The Great Deflation" is factored in, it is very clear that "ObamaCare" cannot stop the death spiral. A combination of wage deflation, rising unemployment, and taxpayer dollars drying up at every level of government will render "ObamaCare" ineffective as the vast ocean of money needed to provide subsidies to help people afford coverage starting in 2014 won't be available. Rising unemployment and wage deflation will have the effect of causing people to drop coverage as it becomes unaffordable, which will accelerate the death spiral.
By 2017, health insurance premiums for family health coverage will be around $58000 a year in today's terms and $26500 a year in nominal terms. This underscores the amplifying effect of a deflationary collapse on a death spiral. This would be the point where the death spiral goes critical. The Great Depression resulted in insurance companies imploding back in the early 1930s. In the same way, "The Great Deflation" will result in the collapse of health insurance companies in 2017. Once the health insurance companies go under, the entire health care system will rapidly unravel as hospitals, clinics, and pharmaceutical companies go under in quick succession as revenue dries up. The health care system in the United States will collapse in 2017.
There is good that will come from the collapse of the current health care system. Bear markets act to purge everything that stands in the way of future growth and prosperity. Back in late April 2011, I predicted that the collapse of the current "for-profit" health industry will lead to the implementation of a single payer system at the federal level in 2022. I still think that a single payer system is in the future after the current deflationary collapse ends.