I think you've been misled about sentence reductions at the federal level. The federal system isn't nearly as lax as the state system. In Fedland, you can get the following reductions:
1. 15% reduction for good behavior. The Bureau of Prisons uses "expected sentence" instead of actual sentence when calculating good time. This results in substantially less than a 15% reduction even under optimal circumstances. Regardless, a prisoner's best hope is 1 year reduction for every 7 years sentenced.
2. Maximum 1 year for completing residential drug abuse program.
3. Maximum 6 months of sentence to be served in a halfway house.
4. Time served reductions. This really isn't that big of a consideration unless someone has a very short sentence or spent a significant amount of time in custody prior to sentencing.
Let's assume that Madoff was sentenced to 15 years. He would have gotten (at best) a 2 year reduction for good behavior, 1 year reduction for drug treatment (unlikely he would be eligible but with good attorneys anything is possible), 6 months half way house, and maybe 4 months time served. He'd serve somewhere around 11 years and 2 months (about 74% of his sentence). I wouldn't call that a huge reduction.