If you watch this video, you'll discover that your actual health (Not blood) leads to a blurry screen.
Saline bags/blood bags may restore blood, but the ONLY way to restore health is over time by natural regeneration. (You'll have a healing or healthy tag in your inventory by your character.)
To regenerate health and blood, watch this video.
You'll discover that to get the "Healing/healthy" status, you must eat and drink constantly. AS outlined in the video, your body can hold a very large amount of food, and a decent amount of water (The Hungry status only appears at 6% of your maximum capacity! That's a EXTREMELY large amount of space going to waste! Water doesn't have as high as a capacity, but the thirsty messages only appear at 50 percent, so you still should drink and eat everything you find. If you find a water pump, mash the F button to drink from it constantly until you get a message your stomach is full. (The stomach stat is a different stat, it's NOT related to being hungry but how full your actual stomach is. Think of it as a "Limiter")
Once your "Energy" and "Water" stats are high up (The video gives approximate values, it's pretty high) for around 20 minutes, you'll see the healing/healthy status.
Once you have this status, your body will regenerate blood, and also you'll regenerate your health, causing the blurriness to go away. There are two different speeds of regeneration depending on how well fed/hydrated you are.
The blurriness is not a bug. I believe the blurriness going away when you go to video settings is an actual bug, however.