Satellites do work on atmospheric gas molecules that get in their way.
Those molecules stick to the satellite and so must also be accelerated to the satellite velocity. That kinetic energy comes from the satellite's potential energy, so it orbits lower.
But a lower orbit requires a greater orbital velocity, so it orbits even lower and faster, which means it encounters more gas molecules, more often. In the end, it burns up at its highest speed, in the upper atmosphere.