My theory is that in the story, the narrator’s grandmother dies a much darker death on Christmas Eve. Maybe she was mugged and gunned down, a la the Waynes. Maybe she just suffered a heart attack, brain aneurysm or something more natural? The song mentions her forgetting medication, so it’s possible that it lead to a fatal complication. Who knows. Maybe it was still just a regular hit-and-run, similar to the song.
When this happens, the family doesn’t want to explain to the young narrator about the things that would have killed her. If she was murdered, they don’t want to explain how people can be so evil, etc. So they try to give him a kid friendly explanation which is getting run over by Santa. It’s also common adult knowledge that Santa isn’t real, so I think if she was run over by him, the family would act different. More genuinely shocked that this mythical being exists and try to prove to the media that Santa is real, etc. Instead of that, they proceed normally, like “dressing in black.” Only “Grandpa” is mentioned to believe in Santa with him, which could be 1) because he’s so old and senile that he believes the lie too or 2) he’s trying really hard to convince the kid it was Santa so he could get to stay in the dark at his own emotional expense. H/T >