That's interesting. I've been on Medicare Part A and pay for a Part B supplement with a private insurance company. Premiums for Part A are deducted from my SS check and I pay for the part B supplement out of my pocket. In the 14 years I've been on Medicare, neither my wife or I have ever had to pre-qualify for any services. In fact, I don't even contact anyone at Medicare, I've never even heard of any form to fill out.
It sounds like your grandparents might be on some form of Medicare Advantage. My understanding is; that's more of a managed care HMO type deal, so that might be a factor in the extra steps and qualifications for treatment.