If the payer won't issue a corrected form, then you can follow the previous poster's suggestion.
Enter the amount shown on the Form 1099-MISC for medical payments in TurboTax under Wages and Income, Other Reportable Income, and identify it as 1099-MISC box 6 medical.
Then, make another entry for the same amount, but make it a negative number (add a minus sign in front of the number). Enter in the description that you are subtracting nontaxable medical payments.
Again, note that you cannot deduct the medical expenses if you don't report the payment.
See this tax tips article for more information about Form 1099-MISC.
See also this IRS analysis regarding the taxability of settlements and judgments.
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