I think that would be true if this was done well, with a reasonable ramp-down period and effort to reduce the regulations that many of the IDCs get spent on (grants management offices, etc.). I cannot possibly envision a more incompetent way to go about things if that is actually the goal. Many/most grants will represent a net loss for the institution under this model. Universities will - quite understandably - start disallowing applications. Most medical school researchers are soft money, which will go away.
I mean, if by "restructure" you mean mass unemployment and a sizable portion of institutions having to simply close their doors and/or halt all research activities while only providing bare-bones education....I can perhaps see it. I certainly don't think the effects of this will be subtle. Schools like UNC just got thrown into a budget deficit of ~ $300,000,000 (rough armchair calculation based on their IDC rate and 2024 NIH grant support) overnight. Obviously it will vary across schools, but that's a big enough hole they can't just shuffle some chairs around to dig up. Some may be rescued by states, others may lean on endowments but a lot won't be able to adjust quick enough.