What you say is correct; however, since half of your Social Security amount is subtracted before calculating taxable benefits on the worksheet, I imagine they think this makes up for not directly subtracting your Medicare premiums.
You could consider that the half you are subtracting makes up for the extra pension income you are reporting.
On researching, it seems many employers issue a check separately for the reimbursed premiums; this is then deducted from Medical Expenses claimed, so if they file using the Standard Deduction, it is non-taxable income.
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