What a nightmare.
And what rotten timing for your stepdad. I'm so sorry you both are dealing with this.
I just searched for a reference about the termination of Medicare coverage and couldn't come up with anything. If I had an eye-rolling smiley face I'd insert it here. Navigating the Medicare websites is really confusing, even for someone who has a pretty good grasp on the system.
Here's what I would suggest. Go to this website [medicare.gov] and scroll down to "Step 2". Click on "Organizations" on the left side. From the pull down menu labeled "Organization" choose SHIP - State Health Insurance Assistance Program. Then choose the state your dad lives in and click "View Results". This program is an awesome one that is designed only to help educate folks about Medicare. Call them.
While you could tell them your dad's story, it'll be difficult for them to help because they'll likely have some really specific questions you may or may not have the answer too. Instead, I would ask them for the number to the Ombudsman Program in your dad's area. That program http://www.medicare.gov/Publications/Pubs/pdf/11173.pdf [medicare.gov] can assign someone to work with your dad, personally, to figure this out. It is their job to help him understand what's going on and work towards resolution. And if your dad is open to this, it would probably helpful for you to be in on this meeting. Caring from a distance can be so diffiult, so perhaps they can just use a speaker phone. This will help you get looped in on what the deal is, as well as express to the Ombudsman that you are authorized to speak with him/her about your dad's case.
I'm really hopeful this will help! If you're still stuck, let me know and I'll see if I can come up with anything else.