ESV - 5 But he was wounded for our transgressions; he was crushed for our iniquities; upon him was the chastisement that brought us peace, and with his stripes we are healed.
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Although God certainly has the power to heal physical illnesses, the "healing" being spoken of in the passage cited in the question is not physical, but spiritual. The prophecy contained in this passage is describing the manner in which the punishment and suffering that Jesus would endure (hundreds of years after Isaiah wrote these words) during His arrest, trial, and crucifixion (including the "stripes" that Jesus received from being lashed with a whip on the order of Pontius Pilate prior to being taken out to Golgotha and crucified (John 19:1)) would fully pay the penalty (eternal separation from God) that God imposed on humans as a consequence of their sin (that is, their disobedience to God's commands). As a result of Jesus' redemptive death and subsequent resurrection, those who place their faith in Christ's perfect righteousness, rather than in their own imperfect works or actions, to make them acceptable in God's sight are spiritually "healed", and receive forgiveness and eternal life in God's presence for Christ's sake. However, in this present life, we are still in a fallen world where physical death, as well as illness, continue to exist as consequences of humanity's sin, and affect everyone. And disease and death (as well as human sin, even on the part of the redeemed) will be present on earth until Christ returns in glory at the close of the present age.
The phrase, "by His stripes we are healed" comes from Isaiah 53:5, a Messianic text that tells us of Christ's redeeming work on the cross. 5 He was wounded because of our rebellious deeds, crushed because of our sins; he endured punishment that made us well; because of his wounds we have been healed. (NET) The word healed is being used as a metaphor for forgiveness here. As Christ bore the punishment for our sin he allowed for our forgiveness and freedom from bondage to sin and from judgment for sin in hell. Read Isaiah 53. It is a powerful gospel text! Is there a sense in which Christ's atonement brings physical healing? Yes, ultimately it will because sickness and death are a result of the Fall and of sin. Thus, in Christ's future kingdom we will be free of all sin, sickness and death. The atonement could be said to allow for physical healing now but it does not guarantee it. Various theological frameworks twist this scripture to make it a promise of physical healing for Christians, such as Word of Faith theology and Pentecostal theology. It is part of the Health and Wealth false gospel, which should be avoided. If you are attending a church where it is taught that "by His stripes we are healed" means that we are promised physical healing here and now, you should leave that church. Prosperity gospel is dangerous and leads many astray from the true gospel by which we are saved. John Stott’s evaluation of Isaiah 53: “Pentecostalism has long concluded from upon these texts (Isa. 53:4-5 and Matt. 8:16-1) that healing was achieved for Christians by Christ's work at the cross. They conclude that Isaiah 53:4-5 promises healing by Jesus for Christians as a result of his work of atonement. Kenneth Copeland and Kenneth Hagan are contemporary American teachers who advocate this line of thinking. However, using Isaiah 53:4-5 to say that healing is as readily available to Christians as is forgiveness of sin is not sustainable. Firstly, Matthew 8:16-17 is not a reference to Christ's work of atonement but to his healing ministry which preceded it. The Apostle Matthew has unavoidably taught that Isaiah's prophecy was fulfilled in Jesus activity of healing “all the sick” before his death on the cross. Secondly, the Apostle Peter's quotation of Isaiah 53:4 in 1 Peter 2:24 shows that this prophecy applies to Christians as a reference to the forgiveness of sins. Isaiah's words themselves occur in the wider context of a passage all about justification from transgression (Isaiah 53:5-12). The Apostle Peter interprets, “He himself bore our sins in his body on the tree, so that we might die to sins and live for righteousness; by his wounds you have been healed.” Stott, John. The Cross of Christ, IVP, 1986, p. 224-245
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