This is the third and final in a series of papers on dual eligibility supported by The Pew Charitable Trusts, with additional support from The Henry ]. Kaiser Family Foundation, Center for Vulnerable Populations. The first paper, Managiiig Care for Older Beneficiaries of Medicaid and Medicare: Prospects and Pitfalls (September, 1994), describes the fragmentation of care experienced by dually eligible elderly persons, and explores the potential benefits and disadvantages of integrating the two funding streams for dually eligible persons. The second paper, Federal Barriers to Managed Care for Dually Eligible Persons (August, 1995), describes federal policy barriers that make the integration of Medicaid and Medicare difficult. This paper outlines a series of design choices facing states as they fashion managed care programs for dually eligible beneficiaries.