This article analyses the formulation and implementation of a relatively new statutory programme of care services for dependent elderly people in Israel, which has as a basic characteristic the supply of services by non-state agencies. The analysis serves as a basis for an exploration of the effects of privatisation and the emergence of quasi-markets upon the functioning of the welfare state both as a benefits provider and as a major employer. In contrast to the perspectives that consider privatisation as leading to the weakening of the state in the welfare domain, we argue that through the transfer of services supplied by non-state agencies the state protects itself from demands and pressures from clients, while maintaining its control and regulation capabilities. This process decreases the state's accountability towards its citizens, enhancing in turn its autonomy. Privatisation policies do not imply, therefore, the dissolution of the welfare state, but rather the emergence of a new mode of state intervention.