Yep, the water runs back down the bottom of the shaft. BUT - it comes off the blade so fast that it often wraps around the entire circumference of the shaft first, and only then sluices down to the bottom.
This isn't because we geezers are paddling fast; it's the laminar flow of the water as it clings to the surface of the blade first being lifted, then swung through the stroke. There's likely a half cup of water, maybe a bit more, washing back down the blade as it lifts out of the water.
As the end of the paddle rises, the water gains speed and often simply overpasses common drip rings and continues down the shaft. Surface tension makes it cling to the shaft, and it takes a violent interruption to make it break its hold. That's why Joey's cup - that should actually stop, contain, and finally dump that half cup of fluid - is such a breakthrough.
But, it has to be far enough back up the shaft so it doesan't tangle in weeds if paddling in gunky, heavy weeded waters we call moose pasture.