It appears the reimbursement was reported to you in the wrong box. As long as you report the income from Form 1099-MISC on your tax return, you have met the IRS requirements.
To correctly report this transaction, enter the payment amount under Box 3 "Other Income" in the TurboTax 1099-MISC entry screen. As you continue through this section, TurboTax will ask you more about the source of this income and if it was related to your job (say "no"). The result will be income on Schedule 1 Line 9.
The offset to this income would be reported under Medical Expenses. If you itemize your deductions, you may be able to deduct the medical and dental expenses that exceed 7.5% of your adjusted gross income for the year. TurboTax will help you determine if your medical expenses are deductible.
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