If you can't apply the refund to qualifying medical expenses in 2019, then, yes, you will likely have to declare the refund as income and not only pay income tax but also a 20% penalty in tax year 2019. However, you have two alternatives:
(1) Do you have (or will you have) any medical bills before the end of calendar year 2019? If so, pay these bills with the refund. Keep the receipts and document what you paid with the refund in case the IRS ever asks.
(2) Were there any medical bills in the past (but incurred since the HSA was created) that you paid with after-tax dollars? If so, apply the refund to this amount, as if you requested a reimbursement of HSA finds for prior year expenses. Note, it doesn't matter how far you go back, so long as the expense was incurred after the HSA was created (generally, the date of the first contribution). If you can do this, then document the receipts and what you did in case anyone ever asks.
No, this isn't exactly the right process but since, to my knowledge, the IRS has not addressed the situation of a mistaken distribution from a closed HSA (perhaps someone will update us on this), and since the net effect on your tax benefits is the same as if you returned the "mistaken distribution", and since you have documented all this (right?), you should be OK if anyone ever asks.
Otherwise, to stay on the right side of things, you would probably have to declare any part of the refund that was not charged off to qualifying medical expenses to your income in 2019, and pay the income tax and penalty.
