Merit based on what, class rank, GPA, SAT scores? Almost everyone who gets in are at the top in all of those categories. It would turn in a need scholarship by default.
Since I worked for a year on the graduate admissions committee for my department (EE) at Stanford, I can give you some idea of how it's done. That year, we had 5,000 applicants. The first cut was done solely on GRE scores and normalized GPA (we adjusted for known "grade inflation"). That got us down to 500. We then threw out all of the numbers and asked "okay, what else did you do?". People who had been active in campus groups, fraternities, did projects, worked on the side all got a big boost, as we cut to the final 200. That was for the Masters program, and of those, about 70 would make it into the Doctoral track. And of those, about 40 would actually finish.
Yes, that old-fashioned mean, nasty, discriminatory stuff.
Almost everyone who gets in are at the top in all of those categories.
Not true. Most URMs*** who are admitted to elite schools are not "at the top in all of those categories." URMs constitute a significant proportion of the admittees to elite schools. (True, many do not stay all four years; but, they are admitted.)
Elite schools grant URMs large scholarships, but such grants are not based on merit -- at least, not merit that is based on the criteria you listed, as compared to non-URM admittees.
***URM = "underrepresented minority" in college admissions lingo