A method and apparatus to compress video data to smaller size and embed extra information into the compressed data using the integrated lossy and lossless compressions is described. The method can be used to compress reference frames of a video codec (coder/decoder) combines codec where the small noise is critical and to reduce bus bandwidth. Data transfer between an encoder and an external frame memory connected via an external bus in a video codec is reduced by compressing data from the encoder prior to inputting into the frame memory over the external bus, and decompressing the compressed data from the frame memory after retrieving over the external bus. Reference frames are compressed to variable size without causing any considerable artifact to reduce bus bandwidth between the encoder core and external memory. In the method, lossy and lossless compression is integrated to maximize the compression efficiency.