Imagine if you were a contractor (NO, not a builder, but anyone who works "on contract" rather than being a salaried or wage employee). Okay, now imagine that, when you submit bids to a customer, the customer is not the person who decides who gets the contract. Instead, the customer calls on your COMPETITORS to decide who gets the contract, AND the competitors all get to know who is behind each bid. Oh, and there is no certification or oversight of the process, either. The competitors do not even have to read the bids. If you think you were rejected unfairly, you get to appeal, and it's the competitors who consider your appeal.
That is how most medical and scientific research in the USA is funded, and it is how it's been funded for about 80 years.
Of course, we could just eliminate all public funding of research, problem solved? Nope, because private funding entities pretty much do the same thing. They tap the same pool of applicants to do proposal evaluations.