> That said, it's obviously a model that really requires them to select the best of the best labs as you mention...
It seems like it's also a model that makes labs better. What labs will be the "best of the best labs" is not independent from the way their funding sources provide pressure/rewards/punishments to do work in certain ways or do certain kinds of work.
Yes, you are very much correct. Unfortunately, if HHMI and the like are unwilling* to do these sorts of funding experiments, I'm not really sure who will.
* I can't claim to be up-to-date on the distribution of labs funded so for all I know someone is already doing this.
HHMI is not the only one - certainly DARPA is willing to provide large funds for specific areas of interest (though a VERY different funding model). Wellcome trust, the Allen Institute, Broad institute, and others also work with slightly different models that can complement the NIH funding lines.
It seems like it's also a model that makes labs better. What labs will be the "best of the best labs" is not independent from the way their funding sources provide pressure/rewards/punishments to do work in certain ways or do certain kinds of work.