The order in which things are done is this:
1. You enter all medical bills (reimbursed by insurance or HSA or not).
2. You enter your insurance reimbursement, which is subtracted from #1.
3. TurboTax automatically carries over all HSA distributions, which are also subtracted from #1.
4. Any remainder is applied to the 7.5% floor, and the excess (if any) is reported on Schedule A.
If you are looking at some number on the Deductions & Credits screen, ignore it - TurboTax often displays the total of what you entered on internal screens, but the only real number is on Schedule A.