"I'm concerned that the difference between the 1099-SA with a distribution code of 2 for excess contribution , and the lower additional taxable income reported by Turbotax is a red flag to the IRS ?"
I have not heard that the IRS has paid close attention to this. Besides, there might actually be a good reason for it.
So, so long you have qualifying medical expenses that you can apply to the $1,384 difference, I would not be greatly concerned. Please document what they are and stick it in your tax file.
Since you are now on Medicare, this issue won't come up again - you'll never be able to contribute to an HSA again, and you can distribute funds from the HSA until they run out.
NOTE, since you are probably 65+, you can take funds out of the HSA as if it were an IRA - no penalty. Still, you pay income tax on the withdrawal, so unless you have a gazillion dollars in your HSA, you might as well save it for the medical expenses (on which you don't pay income tax)...
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