"He is worried about his physical state but he's working every day to get better," Costa said on Wednesday.
Nadal is sidelined for Spain's Davis Cup match against Switzerland next week after another serious knee injury forced him out of the Australian Open in January.
Story continues below ↓advertisement | your ad hereNadal has been plagued by injuries since November 2008, when tendinitis in his knees forced him to miss Spain's Davis Cup win over Argentina. The 23-year-old Nadal missed several months last summer to knee problems after the French Open, where he failed to lift the trophy for the first time in five years.
"Until last year at Roland Garros and the problems, he had achieved everything," Costa said. "It's normal, after 22 years and winning everything, to have some down time."
Four-time Grand Slam winner Manolo Santana believes Nadal will recover and be back to his best in time to defend his title at the Indian Wells tournament in California next month.
Nadal recovered to help Spain win a second straight Davis Cup in December, although he and top-ranked Roger Federer will both be missing from the March 5-7 best-of-five series.
Costa said there is "no limit" to his team even if it has a different makeup than usual with Nadal and Fernando Verdasco sidelined by injury, and Feliciano Lopez left out.
"That was my decision, that was a technical decision," Costa said. "I think (the others) also deserve a chance to represent Spain. You have to have alternatives so you're ready for any future tie also."
Former top-ranked player Juan Carlos Ferrero, David Ferrer, Tommy Robredo and Marcel Granollers will represent Spain at the 11,000-capacity bullring in the northern city of Logrono.
© 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Nadal set for further tests on knee injuryValencia suffer Bruno blow
