This phase II trial studies the side effects and how well fludarabine phosphate, cytarabine, filgrastim-sndz, gemtuzumab ozogamicin, and idarubicin hydrochloride work in treating patients with newly diagnosed acute myeloid leukemia or high-risk myelodysplastic syndrome. Drugs used in chemotherapy, such as fludarabine phosphate, cytarabine, and idarubicin hydrochloride, work in different ways to stop the growth of cancer cells, either by killing the cells or by stopping them from dividing. Gemtuzumab ozogamicin is a monoclonal antibody, called gemtuzumab, linked to a antitumor drug, called calicheamicin. Gemtuzumab is a form of targeted therapy because it attaches to specific molecules (receptors) on the surface of cancer cells, known as CD33 receptors, and delivers calicheamicin to kill them. Colony-stimulating factors, such as filgrastim-sndz, may increase the number of immune cells found in bone marrow or peripheral blood and may help the immune system recover from the side effects of chemotherapy. Giving fludarabine phosphate, cytarabine, filgrastim-sndz, gemtuzumab ozogamicin, and idarubicin hydrochloride may kill more cancer cells.

PRIMARY OBJECTIVES:

I. Evaluate the safety of a regimen incorporating fludarabine phosphate (fludarabine), high-dose cytarabine, filgrastim-sndz, gemtuzumab ozogamicin and idarubicin hydrochloride (idarubicin) in patients with untreated inv(16) or t(8;21) acute myeloid leukemia (AML).

II. Evaluate the complete remission rates achieved in this population with this regimen.

SECONDARY OBJECTIVES:

I. Assess the proportion of patients with untreated inv(16) or t(8;21) AML who, having entered complete remission (CR) on this regimen, remain alive in CR two years from CR date.

II. Assess whether the quantitative polymerase chain reaction (Q-PCR) results can be used in detecting relapse in these patients.

OUTLINE:

REMISSION INDUCTION: Patients receive filgrastim-sndz subcutaneously (SC) once daily (QD) beginning on day -1 and continuing until blood count recovery. Patients also receive fludarabine phosphate intravenously (IV) over 30 minutes on days 1-5, cytarabine IV over 4 hours on days 1-5, gemtuzumab ozogamicin IV over 2 hours on day 1. Patients not in remission after their first induction therapy may repeat remission induction therapy.

POST-REMISSION THERAPY: Patients receive filgrastim-sndz SC on day -1, fludarabine phosphate IV over 30 minutes on days 1-3, cytarabine IV over 4 hours on days 1-3, gemtuzumab ozogamicin IV over 2 hours on day 1 of courses 1 or 2 and 5 or 6, and idarubicin hydrochloride IV over 30 minutes on days 2 and 3 of one post-remission course (post-remission courses 3 or 4) determined by the treating physician after discussion with the PI if suboptimal qPCR response (qPCR > 0.01 after post-remission cycle 2 or 3). Treatment repeats every 4-6 weeks for up to 6 courses in the absence of disease progression or unacceptable toxicity.

FURTHER MODIFICATION OF POST-REMISSION THERAPY: Patients older than 60, with significant comorbidities, experiencing life-threatening complications, prolonged cytopenias, or not achieving complete molecular response may receive decitabine IV over 1 hour daily for 5 days after discussion with the principal investigator. Treatment repeats every 4-6 weeks for up to 12 courses in the absence of disease progression or unacceptable toxicity.

After completion of study treatment, patients are followed up every 6 months for 2 years.

Inclusion Criteria:

• Patients must have untreated AML, or high-risk myelodysplastic syndromes (MDS) (refractory anemia with excess blasts, [RAEB], or RAEB "in transformation" [RAEB-t]) characterized by t(8;21), inv(16), or t(16;16); the presence of additional abnormalities is irrelevant
• Patients must provide written consent
• Participants will not be excluded based on performance status; for patients with Eastern Cooperative Oncology Group (ECOG) performance status >= to 3 the dosing schedule will be discussed with study chairman
• Patients with organ dysfunction will not be excluded from the study; for patients with evidence of organ dysfunction (creatinine >= 1.5, cardiac ejection fraction =< 50%, total bilirubin >=2 and aspartate aminotransferase [AST]/alanine aminotransferase [ALT] >= 3 times upper limit of normal [ULN]), dose adjustments/omissions will be made
• Up to one cycle of prior induction therapy will be permitted to include patients in whom presence of "good-risk" cytogenetics was initially missed; if the patient is in remission from induction therapy, he/she will receive post-remission therapy; if the patient is not in remission then he/she will receive induction therapy
• Patients of child bearing potential should practice effective methods of contraception

Exclusion Criteria:

• Pregnant and lactating females will be excluded