Off With Their (Over)heads: Trump Administration at War with Public Health

Photo by Hildabast, CC BY-SA 4.0 , via Wikimedia Commons

This was expected but is still hitting like an anvil:

The US National Institutes of Health is lowering the maximum “indirect cost rate” that research institutions can charge the government, the agency said late Friday – a move that scientists said could be devastating for the nation’s position as a research leader.

The average NIH grant to an institution has typically had about 30% earmarked for infrastructure costs such as facilities, maintenance and security; some institutions charged up to 60% or more. The new NIH policy will cap that indirect cost rate at 15%, effective immediately.

“NIH spent more than $35 Billion in Fiscal Year 2023 on almost 50,000 competitive grants to more than 300,000 researchers at more than 2,500 universities, medical schools, and other research institutions,” the agency said in its announcement. “Of this funding, approximately $26 billion went to direct costs for research, while $9 billion was allocated to overhead through NIH’s indirect cost rate.”

The agency said the move would more closely align government-funded indirect costs with the rates paid by private foundations. The Gates Foundation, for example, pays a 10% rate for indirect costs, while the Carnegie Corporation and John Templeton Foundation each pay 15% of indirect costs for research.

So let me explain what’s going on here. While I don’t work on NIH grants, the process for the NSF and NASA grants I work on is identical.

When I put together a research grant, it includes a proposed budget. That budget might include part of my salary, part of a student’s salary, travel funds, publication funds and, in some cases, equipment. Those are direct costs that I, as Primary Investigator, have control of, and they are approved, at least in the broad details, by the grant committee and the funding agency.

However, I do not do my work floating in a vacuum. I do my work at a University and they have to spend money supporting my research. There are staff members who manage the grant, check compliance, maintain computers and keep me out of trouble. There’s a building, which depreciates, and the electricity to run said building. Students also come with costs that are not covered by the grant. There’s an entire ecosystem in which scientific research happens.

In order to compensate research institutions for this, every grant comes with indirect costs, money given to the institution to defray their operating costs. This is sometimes called “overhead”, but that makes it sounds like it’s all going to bureaucrats. A better term is F&A — facilities and administration. Every time so much as a light bulb is changed, at least a part of the cost is paid by research grant overhead.¹

Indirect costs are usually calculated as a percentage of the grant. Some overhead rates can be 60% or even higher. Because Elon can’t be bothered to do basic math, he’s claiming this means 60% of federal research funds go to overhead. This is not the case. The overhead rate is exclusive — on top of the direct costs. That means that you might get, say, $100,000 in direct costs for the grant and $60,000 in indirect costs. So the actual percentage going to the institution would be 37.5%, a little over one-third. Private foundations, as noted, sometimes will pay smaller overhead rates. But private funds also come with a lot less paperwork because you’re not accountable to the taxpayers.² Overall, NIH is spending about 26% of its funds on indirect costs which … actually seems quite reasonable. It’s comparable to the admin costs in the defense and healthcare industries.

Some big public universities might be able to make up for this by raising tuition or scrounging for private funds. But for most institutions, this cut will be devastating. At best, it will mean getting rid of almost all support staff just to keep the lights on. It will mean researchers being swamped with paperwork and extremely complex compliance issues instead of doing research. At worst, it will mean massive downsizing of biomedical research, one of the most dynamic and critical sectors of our economy.

Now, to be fair, overhead rates have been rising in recent years, partly because everything is getting more expensive in higher ed and partly because many research grants have not been increased to account for rising costs. I will say: I do think that overhead costs have gotten a bit out of hand and I would welcome federal agencies being a little more aggressive in tamping them down. But this edict from DOGE is not a careful consideration. This is picking a number out of Project 2025 garbage because it was the low end of the spectrum. Actually, it’s worse than Project 2025, which wanted to use 15% as a floor and negotiate upward. Oh … and Project 2025 wanted to do this through Congress

And that’s the gripping hand here. Like everything else this Administration is doing, this is probably illegal. Overhead rates are negotiated and contracted; the federal government can’t unilaterally rewrite contracts on its own. Moreover, it seems like this sort of change has to be authorized by Congress or at least through some sort of procedure with public comment. It can’t be done by some 23-year-old Musk disciple who goes by the moniker of PutinSnoot47.

However, this does highlight an Administration priority: an attack upon science and especially upon the biological sciences. Nominating Kennedy for HHS head, nominating Bhattacharya for NIH head and trying to slash NIH funding by a third shows an Administration at war with public health and medical research.

If there is one fixed star of Donald Trump’s second term, it is revenge on those he believes wronged him. Trump blames his 2020 loss on the COVID pandemic and especially the public health agencies that were on the front lines. It was health agencies that refused to lie for him and pretend the pandemic didn’t exist. When he was claiming COVID would disappear quickly, they were warning us that cases were surging. When he was demanding that we stop testing, they were cranking out cheap tests by the millions. When he raged against shutdowns … well, that wasn’t the idea of healthcare experts but he blames them anyway because he has no concept of object permanence. This is an Administration that believes that if we cover our eyes and pretend diseases don’t exist, they won’t. Just look at how they are currently squelching information on bird flu.

In short, they see this as a thumb in the eye of a group of people they don’t like with little concern for the consequences for national health. It’s the sort of thing we’ve come to expect from an Administration that is obsessed with vengeance. And the impact this will have on public health doesn’t matter to Musk or Trump because rich people will always be able to get cutting edge healthcare (e.g., Trump getting access to monoclonal antibodies when he caught COVID). It’s the rest of us who will suffer.

But … that’s what peasants are for, isn’t it?

1. F&A rates are set by agreements between funding agencies and research institutions. They can vary a lot, even within one institution. And the amount of administration needed for a grant can also vary a lot. The biological sciences have administrative issues I don’t, such as strict rules regarding work on biological samples, human subjects or animal subjects. Many of the physical sciences also have complex rules on environmental and/or safety issues for labs. The most complex thing I occasionally deal with is export control: making sure classified or sensitive information — such as detailed satellite information — doesn’t go to foreign countries in violation of the International Traffic in Arms Regulations (ITAR). I am extremely happy that there is a campus office that deals with this for me.
2. Also, they piggyback a bit on F&A funds from public grants.