I asked this and now I am wondering if the previous proof can be used to show the following:
Let $f(x)=\min_{y \in C}\|y-x\|^2$ where $C$ is a closed set in $\mathbb{R}^n$ and $x,y \in \mathbb{R}^n$.
Show $f(x)$ is a continuous function.
Counter-example: $C=\{0\}$ in $\mathbb R$. In this case $f(x)=x^{2}$ which is not Lipschitz (since $f'(x)=2x$ is not bounded).
Answer for the modified question: $f(x)=[g(x)]^{2}$ where $g(x)=\min_{y \in C} \|y-x\|$. By the link you have provided, $g$ is continuous. Hence, $f$ is also continuous.