Green’s Dictionary of Slang

(US drugs) to commit a drug user (or oneself) to the Lexington Federal Narcotics Hospital in Lexington, Kentucky.

1953		W. Brown Monkey On My Back (1954) 147: Upon his arrival in Lexington, he would be ‘blue-grassed,’ legally declared a drug addict under the laws of Kentucky.
1955		H. Braddy ‘Narcotic Argot Along the Mexican Border’ in AS XXX:2 86: BLUE GRASS, v. To return to the narcotic hospital in Kentucky for further treatment.